UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31,September 30, 2023
or
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number 001-39191
Ovintiv Inc.
(Exact name of registrant as specified in its charter)
Delaware | 84-4427672 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Suite 1700, 370 17th Street, Denver, Colorado, 80202, U.S.A.
(Address of principal executive offices)
Registrant’s telephone number, including area code (303) 623-2300
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Shares | OVV | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☒ | Accelerated filer | ☐ | |
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Non-accelerated filer | ☐ |
| Smaller reporting company | ☐ |
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Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
Securities registered pursuant to Section 12(b) of the Act:
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Number of registrant’s shares of common stock outstanding as of |
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1
OVINTIV INC.
FORM 10-Q
TABLE OF CONTENTS
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| Condensed Consolidated Statement of Changes in Shareholders’ Equity |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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2
DEFINITIONS
Unless the context otherwise requires or otherwise expressly stated, all references in this Quarterly Report on Form 10-Q to “Ovintiv,” the “Company,” “us,” “we,” “our,” and “ours” refer to Ovintiv Inc. and its consolidated subsidiaries for periods on or after January 24, 2020 and to Encana Corporation and its consolidated subsidiaries for periods before January 24, 2020. In addition, the following are other abbreviations and definitions of certain terms used within this Quarterly Report on Form 10‑Q:
“AECO” means Alberta Energy Company and is the Canadian benchmark price for natural gas.
“ASU” means Accounting Standards Update.
“bbl” or “bbls” means barrel or barrels.
“BOE” means barrels of oil equivalent.
“Btu” means British thermal units, a measure of heating value.
“DD&A” means depreciation, depletion and amortization expenses.
“ESG” means environmental, social and governance.
“FASB” means Financial Accounting Standards Board.
“GHG” means greenhouse gas.
“Mbbls/d” means thousand barrels per day.
“MBOE/d” means thousand barrels of oil equivalent per day.
“Mcf” means thousand cubic feet.
“MD&A” means Management’s Discussion and Analysis of Financial Condition and Results of Operations.
“MMBOE” means million barrels of oil equivalent.
“MMBtu” means million Btu.
“MMcf/d” means million cubic feet per day.
“NCIB” means normal course issuer bid.
“NGL” or “NGLs” means natural gas liquids.
“NYMEX” means New York Mercantile Exchange.
“NYSE” means New York Stock Exchange.
“OPEC” means Organization of the Petroleum Exporting Countries.
“SEC” means United States Securities and Exchange Commission.
“SIB”S&P 400” means substantial issuer bid.Standard and Poor’s MidCap 400 index.
“TSX” means Toronto Stock Exchange.
“U.S.”, “United States” or “USA” means United States of America.
“U.S. GAAP” means U.S. Generally Accepted Accounting Principles.
“WTI” means West Texas Intermediate.
CONVERSIONS
In this Quarterly Report on Form 10-Q, a conversion of natural gas volumes to BOE is on the basis of six Mcf to one bbl. BOE is based on a generic energy equivalency conversion method primarily applicable at the burner tip and does not represent economic value equivalency at the wellhead. Given that the value ratio based on the current price of oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value, particularly if used in isolation.
3
CONVENTIONS
Unless otherwise specified, all dollar amounts are expressed in U.S. dollars, all references to “dollars”, “$” or “US$” are to U.S. dollars and all references to “C$” are to Canadian dollars. All amounts are provided on a before tax basis, unless otherwise stated. In addition, all information provided herein is presented on an after royalties basis.
The terms “include”, “includes”, “including” and “included” are to be construed as if they were immediately followed by the words “without limitation”, except where explicitly stated otherwise.
The term “liquids” is used to represent oil, NGLs and condensate. The term “liquids rich” is used to represent natural gas streams with associated liquids volumes. The term “play” is used to describe an area in which hydrocarbon accumulations or prospects of a given type occur. Ovintiv’s focus of development is on hydrocarbon accumulations known to exist over a large areal expanse and/or thick vertical section and are developed using hydraulic fracturing. This type of development typically has a lower geological and/or commercial development risk and lower average decline rate, when compared to conventional development.
References to information contained on the Company’s website at www.ovintiv.com are not incorporated by reference into, and does not constitute a part of, this Quarterly Report on Form 10-Q.
FORWARD-LOOKING STATEMENTS AND RISK
This Quarterly Report on Form 10-Q, and the other documents incorporated herein by reference (if any), contain certain forward-looking statements or information (collectively, “forward-looking statements”) within the meaning of applicable securities legislation, including Section 27A of the Securities Act of 1933 (the “Securities Act”), as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements, except for statements of historical fact, that relate to the anticipated future activities, plans, strategies, objectives or expectations of the Company are forward-looking statements. When used in this Quarterly Report on Form 10‑Q, and the other documents incorporated herein by reference (if any), the use of words and phrases including “anticipates,” “believes,” “continue,” “could,” “estimates,” “expects,” “focused on,” “forecast,” “guidance,” “intends,” “maintain,” “may,” “opportunities,” “outlook,” “plans,” “potential,” “strategy,” “targets,” “will,” “would” and other similar terminology is intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words or phrases. Without limiting the generality of the foregoing, forward-looking statements contained in this Quarterly Report on Form 10‑Q include: expectations of plans, strategies and objectives of the Company, including anticipated reserves development; the Company’s ability to consummate any pendingfuture acquisition and divestiture transactions (including the transactions described herein);transactions; the Company’s ability to successfully integrate any acquired assets (including the acquisition described herein)Permian Acquisition as defined in Note 8 to the Condensed Consolidated Financial Statements under Part I, Item 1 of this Quarterly Report on Form 10-Q) into its business; other risks and uncertainties related to the closing of pending acquisition and divestiture transactions (including the transactions described herein); drilling plans and programs, including availability of capital to complete these plans and programs; the composition of the Company’s assets and the anticipated capital returns associated with its assets; anticipated oil, NGL and natural gas prices; the anticipated success of, and benefits from, technology and innovation, including the cube development model, new or advanced drilling techniques or well completion designs; anticipated drilling and completions activity, including the number of drilling rigs and frac crews utilized; anticipated proceeds and future benefits from various joint venture, partnership and other agreements; anticipated oil, NGLs and natural gas production and commodity mix; the Company’s capital structure and ability to access credit facilities, credit markets and other sources of liquidity; the ability of the Company to timely achieve its stated ESG goals, targets and initiatives; the impact of changes in federal, state, provincial, local and tribal laws, rules and regulations; anticipated compliance with current or proposed environmental legislation; the Company’s ability to manage debt and financial ratios and comply with financial covenants; the implementation and outcomes of risk management programs, including exposure to commodity prices, interest rate and foreign exchange fluctuations and the volume of oil, NGLs and natural gas production hedged; the declaration and payment of future dividends and the anticipated repurchase of the Company’s outstanding common shares; the Company’s ability to manage cost inflation and expected cost structures, including expected operating, transportation, processing and labor expenses; and the outlook of the oil and natural gas industry generally, including impacts from changes to the geopolitical environment.
The forward-looking statements included in this Quarterly Report on Form 10-Q involve risks and uncertainties that could cause actual results to differ materially from projected results. Accordingly, investors should not place undue reliance on forward-looking statements as a prediction of actual results. We have based these forward-looking statements on current expectations and assumptions about future events, taking into account all information currently known by us. While we consider these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive,
4
regulatory and other risks and uncertainties, many of which are difficult to predict and beyond our control. The risks and
4
uncertainties that may affect the operations, performance and results of our business and forward-looking statements include, but are not limited to, those set forth in Item 1A. Risk Factors of the Company’s most recent Annual Report on Form 10‑K for the fiscal year ended December 31, 2022 (the “2022 Annual Report on Form 10-K”) and in thisthe Company’s Quarterly Report on Form 10-Q;10-Q for the three months ended March 31, 2023; and other risks and uncertainties impacting the Company’s business as described from time to time in the Company’s other periodic filings with the SEC or Canadian securities regulators.
Although the Company believes the expectations represented by its forward-looking statements are reasonable based on the information available to it as of the date such statements are made, forward-looking statements are only predictions and statements of our current beliefs and there can be no assurance that such expectations will prove to be correct. All forward-looking statements contained in this Quarterly Report on Form 10‑Q are made as of the date of this document (or in the case of a document incorporated herein by reference, the date of such document) and, except as required by law, the Company undertakes no obligation to update publicly or revise any forward-looking statements. The forward-looking statements contained or incorporated by reference in this Quarterly Report on Form 10‑Q, and all subsequent forward-looking statements attributable to the Company, whether written or oral, are expressly qualified by these cautionary statements.
The reader should carefully read the risk factors described in Item 1A. Risk Factors of the 2022 Annual Report on Form 10‑K and in thisthe Company’s Quarterly Report on Form 10-Q for the three months ended March 31, 2023, for a description of certain risks that could, among other things, cause actual results to differ from these forward-looking statements.
5
PART I
Item 1. Financial Statements
Condensed Consolidated Statement of Earnings (unaudited)
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| Three Months Ended |
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| Three Months Ended |
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| Nine Months Ended |
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| March 31, |
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| September 30, |
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| September 30, |
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(US$ millions, except per share amounts) |
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| 2023 |
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| 2022 |
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| 2023 |
| 2022 |
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| 2023 |
| 2022 |
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Revenues |
| (Note 2) |
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Product and service revenues |
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| $ | 2,592 |
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| $ | 3,407 |
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| $ | 2,913 |
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| $ | 3,643 |
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| $ | 7,857 |
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| $ | 11,064 |
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Gains (losses) on risk management, net |
| (Note 18) |
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| (58 | ) |
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| (1,458 | ) |
| (Note 19) |
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| (282 | ) |
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| (111 | ) |
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| (193 | ) |
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| (1,864 | ) |
Sublease revenues |
| (Note 9) |
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| 17 |
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| 18 |
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| (Note 10) |
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| 18 |
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| 17 |
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| 53 |
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| 52 |
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Total Revenues |
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| 2,551 |
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| 1,967 |
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| 2,649 |
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| 3,549 |
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| 7,717 |
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| 9,252 |
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Operating Expenses |
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Production, mineral and other taxes |
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| 84 |
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| 94 |
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| 89 |
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| 109 |
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| 249 |
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| 321 |
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Transportation and processing |
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| 455 |
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| 406 |
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| 433 |
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| 468 |
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| 1,340 |
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| 1,327 |
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Operating | (Notes 15, 16) |
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| 206 |
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| 188 |
| (Notes 16, 17) |
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| 243 |
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| 228 |
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| 624 |
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| 596 |
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Purchased product |
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| 701 |
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| 1,066 |
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| 846 |
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| 973 |
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| 2,239 |
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| 3,154 |
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Depreciation, depletion and amortization |
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| 364 |
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| 264 |
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| 486 |
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| 291 |
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| 1,269 |
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| 833 |
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Accretion of asset retirement obligation |
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| 5 |
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| 5 |
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| 5 |
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| 4 |
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| 14 |
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| 14 |
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Administrative | (Notes 15, 16) |
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| 58 |
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| 144 |
| (Notes 8, 16, 17) |
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| 80 |
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| 103 |
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| 306 |
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| 318 |
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Total Operating Expenses |
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| 1,873 |
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| 2,167 |
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| 2,182 |
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| 2,176 |
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| 6,041 |
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| 6,563 |
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Operating Income (Loss) |
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| 678 |
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| (200 | ) |
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| 467 |
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| 1,373 |
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| 1,676 |
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| 2,689 |
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Other (Income) Expenses |
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Interest |
| (Note 4) |
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| 71 |
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| 74 |
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| (Note 4) |
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| 98 |
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| 83 |
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| 249 |
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| 248 |
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Foreign exchange (gain) loss, net |
| (Notes 5, 18) |
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| (3 | ) |
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| (1 | ) |
| (Notes 5, 19) |
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| (22 | ) |
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| 19 |
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| - |
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| 21 |
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Other (gains) losses, net | (Note 16) |
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| (3 | ) |
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| (27 | ) | (Note 17) |
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| (2 | ) |
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| (3 | ) |
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| (16 | ) |
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| (30 | ) | ||
Total Other (Income) Expenses |
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| 65 |
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| 46 |
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| 74 |
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| 99 |
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| 233 |
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| 239 |
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Net Earnings (Loss) Before Income Tax |
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| 613 |
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| (246 | ) |
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| 393 |
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| 1,274 |
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| 1,443 |
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| 2,450 |
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Income tax expense (recovery) |
| (Note 6) |
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| 126 |
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| (5 | ) |
| (Note 6) |
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| (13 | ) |
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| 88 |
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| 214 |
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| 148 |
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Net Earnings (Loss) |
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| $ | 487 |
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| $ | (241 | ) |
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| $ | 406 |
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| $ | 1,186 |
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| $ | 1,229 |
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| $ | 2,302 |
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Net Earnings (Loss) per Share of Common Stock |
| (Note 12) |
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| (Note 13) |
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Basic |
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| $ | 1.99 |
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| $ | (0.94 | ) |
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| $ | 1.48 |
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| $ | 4.70 |
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| $ | 4.80 |
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| $ | 9.00 |
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Diluted |
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| 1.97 |
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| (0.94 | ) |
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| 1.47 |
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| 4.63 |
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| 4.73 |
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| 8.84 |
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Weighted Average Shares of Common Stock Outstanding (millions) | Weighted Average Shares of Common Stock Outstanding (millions) | (Note 12) |
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| Weighted Average Shares of Common Stock Outstanding (millions) | (Note 13) |
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Basic |
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| 244.3 |
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| 257.4 |
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| 273.7 |
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| 252.5 |
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| 255.8 |
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| 255.7 |
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Diluted |
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| 247.7 |
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| 257.4 |
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| 276.3 |
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| 256.2 |
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| 259.7 |
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| 260.4 |
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Condensed Consolidated Statement of Comprehensive Income (unaudited)
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| Three Months Ended |
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| Three Months Ended |
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| Nine Months Ended |
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| March 31, |
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| September 30, |
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| September 30, |
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(US$ millions) |
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| 2023 |
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| 2022 |
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| 2023 |
| 2022 |
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| 2023 |
| 2022 |
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Net Earnings (Loss) |
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| $ | 487 |
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| $ | (241 | ) |
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| $ | 406 |
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| $ | 1,186 |
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| $ | 1,229 |
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| $ | 2,302 |
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Other Comprehensive Income (Loss), Net of Tax |
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Foreign currency translation adjustment |
| (Note 13) |
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| 2 |
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| 28 |
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| (Note 14) |
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| (59 | ) |
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| (94 | ) |
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| (4 | ) |
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| (125 | ) |
Pension and other post-employment benefit plans |
| (Notes 13, 16) |
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| (2 | ) |
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| (1 | ) |
| (Notes 14, 17) |
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| (2 | ) |
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| (1 | ) |
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| (5 | ) |
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| (4 | ) |
Other Comprehensive Income (Loss) |
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| - |
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| 27 |
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| (61 | ) |
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| (95 | ) |
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| (9 | ) |
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| (129 | ) |
Comprehensive Income (Loss) |
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| $ | 487 |
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| $ | (214 | ) |
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| $ | 345 |
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| $ | 1,091 |
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| $ | 1,220 |
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| $ | 2,173 |
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See accompanying Notes to the unaudited Condensed Consolidated Financial Statements
6
Condensed Consolidated Balance Sheet (unaudited)
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| As at |
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| As at |
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| As at |
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| As at |
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| March 31, |
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| December 31, |
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| September 30, |
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| December 31, |
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(US$ millions) |
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| 2023 |
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| 2022 |
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| 2023 |
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| 2022 |
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Assets |
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Current Assets |
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Cash and cash equivalents |
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| $ | 26 |
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| $ | 5 |
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| $ | 3 |
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| $ | 5 |
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Accounts receivable and accrued revenues (net of allowances |
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of $4 million (2022: $4 million)) |
| (Note 3) |
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| 1,277 |
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| 1,594 |
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of $5 million (2022: $4 million)) |
| (Note 3) |
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| 1,524 |
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| 1,594 |
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Risk management |
| (Notes 17, 18) |
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| 89 |
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| 53 |
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| (Notes 18, 19) |
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| 50 |
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| 53 |
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Income tax receivable |
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| 3 |
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| 43 |
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| 4 |
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| 43 |
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| 1,395 |
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| 1,695 |
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| 1,581 |
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| 1,695 |
|
Property, Plant and Equipment, at cost: |
| (Note 8) |
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| (Note 9) |
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Oil and natural gas properties, based on full cost accounting |
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Proved properties |
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| 58,002 |
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| 57,054 |
|
|
|
|
| 62,950 |
|
|
| 57,054 |
|
Unproved properties |
|
|
|
| 1,016 |
|
|
| 1,172 |
|
|
|
|
| 1,569 |
|
|
| 1,172 |
|
Other |
|
|
|
| 910 |
|
|
| 882 |
|
|
|
|
| 931 |
|
|
| 882 |
|
Property, plant and equipment |
|
|
|
| 59,928 |
|
|
| 59,108 |
|
|
|
|
| 65,450 |
|
|
| 59,108 |
|
Less: Accumulated depreciation, depletion and amortization |
|
|
|
| (50,017 | ) |
|
| (49,640 | ) |
|
|
|
| (50,935 | ) |
|
| (49,640 | ) |
Property, plant and equipment, net |
| (Note 2) |
|
| 9,911 |
|
|
| 9,468 |
|
| (Note 2) |
|
| 14,515 |
|
|
| 9,468 |
|
Other Assets |
|
|
| 1,009 |
|
|
| 1,004 |
|
|
|
| 1,006 |
|
|
| 1,004 |
| ||
Risk Management |
| (Notes 17, 18) |
|
| 3 |
|
|
| 34 |
|
| (Notes 18, 19) |
|
| 14 |
|
|
| 34 |
|
Deferred Income Taxes |
|
|
|
| 221 |
|
|
| 271 |
|
|
|
|
| 199 |
|
|
| 271 |
|
Goodwill |
| (Note 2) |
|
| 2,584 |
|
|
| 2,584 |
|
| (Note 2) |
|
| 2,585 |
|
|
| 2,584 |
|
|
| (Note 2) |
| $ | 15,123 |
|
| $ | 15,056 |
|
| (Note 2) |
| $ | 19,900 |
|
| $ | 15,056 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Current Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Accounts payable and accrued liabilities |
|
|
| $ | 1,872 |
|
| $ | 2,221 |
|
|
|
| $ | 2,420 |
|
| $ | 2,221 |
|
Current portion of operating lease liabilities |
|
|
|
| 88 |
|
|
| 76 |
|
|
|
|
| 81 |
|
|
| 76 |
|
Income tax payable |
|
|
|
| 47 |
|
|
| 4 |
|
|
|
|
| 151 |
|
|
| 4 |
|
Risk management |
| (Notes 17, 18) |
|
| 45 |
|
|
| 86 |
|
| (Notes 18, 19) |
|
| 182 |
|
|
| 86 |
|
Current portion of long-term debt |
| (Note 10) |
|
| 580 |
|
|
| 393 |
|
| (Note 11) |
|
| 709 |
|
|
| 393 |
|
|
|
|
|
| 2,632 |
|
|
| 2,780 |
|
|
|
|
| 3,543 |
|
|
| 2,780 |
|
Long-Term Debt |
| (Note 10) |
|
| 3,176 |
|
|
| 3,177 |
|
| (Note 11) |
|
| 5,454 |
|
|
| 3,177 |
|
Operating Lease Liabilities |
|
|
|
| 809 |
|
|
| 814 |
|
|
|
|
| 813 |
|
|
| 814 |
|
Other Liabilities and Provisions | (Note 11) |
|
| 116 |
|
|
| 131 |
| (Note 12) |
|
| 124 |
|
|
| 131 |
| ||
Risk Management |
| (Notes 17, 18) |
|
| 22 |
|
|
| - |
|
| (Notes 18, 19) |
|
| 4 |
|
|
| - |
|
Asset Retirement Obligation |
|
|
|
| 276 |
|
|
| 281 |
|
|
|
|
| 267 |
|
|
| 281 |
|
Deferred Income Taxes |
|
|
|
| 198 |
|
|
| 184 |
|
|
|
|
| 143 |
|
|
| 184 |
|
|
|
|
|
| 7,229 |
|
|
| 7,367 |
|
|
|
|
| 10,348 |
|
|
| 7,367 |
|
Commitments and Contingencies |
| (Note 20) |
|
|
|
|
|
|
| (Note 21) |
|
|
|
|
|
| ||||
Shareholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Share capital - authorized 775 million shares of stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
2023 issued and outstanding: 244.5 million shares (2022: 245.7 million shares) |
| (Note 12) |
|
| 3 |
|
|
| 3 |
| ||||||||||
2023 issued and outstanding: 272.9 million shares (2022: 245.7 million shares) |
| (Note 13) |
|
| 3 |
|
|
| 3 |
| ||||||||||
Paid in surplus |
| (Note 12) |
|
| 7,555 |
|
|
| 7,776 |
|
| (Note 13) |
|
| 8,644 |
|
|
| 7,776 |
|
Retained earnings (Accumulated deficit) |
|
|
|
| (655 | ) |
|
| (1,081 | ) |
|
|
|
| (77 | ) |
|
| (1,081 | ) |
Accumulated other comprehensive income |
| (Note 13) |
|
| 991 |
|
|
| 991 |
|
| (Note 14) |
|
| 982 |
|
|
| 991 |
|
Total Shareholders’ Equity |
|
|
|
| 7,894 |
|
|
| 7,689 |
|
|
|
|
| 9,552 |
|
|
| 7,689 |
|
|
|
|
| $ | 15,123 |
|
| $ | 15,056 |
|
|
|
| $ | 19,900 |
|
| $ | 15,056 |
|
See accompanying Notes to the unaudited Condensed Consolidated Financial Statements
7
Three Months Ended March 31, 2023 (US$ millions) |
|
|
| Share |
|
| Paid in |
| Retained |
| Accumulated |
| Total |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Balance, December 31, 2022 |
|
|
| $ | 3 |
|
| $ | 7,776 |
|
| $ | (1,081 | ) |
| $ | 991 |
|
| $ | 7,689 |
|
Net Earnings (Loss) |
|
|
|
| - |
|
|
| - |
|
|
| 487 |
|
|
| - |
|
|
| 487 |
|
Dividends on Shares of Common Stock ($0.25 per share) |
| (Note 12) |
|
| - |
|
|
| - |
|
|
| (61 | ) |
|
| - |
|
|
| (61 | ) |
Shares of Common Stock Purchased under Normal |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Course Issuer Bid |
| (Note 12) |
|
| - |
|
|
| (239 | ) |
|
| - |
|
|
| - |
|
|
| (239 | ) |
Equity-Settled Compensation Costs |
|
|
|
| - |
|
|
| 18 |
|
|
| - |
|
|
| - |
|
|
| 18 |
|
Other Comprehensive Income (Loss) |
| (Note 13) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Balance, March 31, 2023 |
|
|
| $ | 3 |
|
| $ | 7,555 |
|
| $ | (655 | ) |
| $ | 991 |
|
| $ | 7,894 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Three Months Ended March 31, 2022 (US$ millions) |
|
|
| Share |
|
| Paid in |
| Retained |
| Accumulated |
| Total |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Balance, December 31, 2021 |
|
|
| $ | 3 |
|
| $ | 8,458 |
|
| $ | (4,479 | ) |
| $ | 1,092 |
|
| $ | 5,074 |
|
Net Earnings (Loss) |
|
|
|
| - |
|
|
| - |
|
|
| (241 | ) |
|
| - |
|
|
| (241 | ) |
Dividends on Shares of Common Stock ($0.20 per share) |
| (Note 12) |
|
| - |
|
|
| - |
|
|
| (52 | ) |
|
| - |
|
|
| (52 | ) |
Shares of Common Stock Purchased under Normal |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Course Issuer Bid |
| (Note 12) |
|
| - |
|
|
| (71 | ) |
|
| - |
|
|
| - |
|
|
| (71 | ) |
Equity-Settled Compensation Costs |
|
|
|
| - |
|
|
| (53 | ) |
|
| - |
|
|
| - |
|
|
| (53 | ) |
Other Comprehensive Income (Loss) |
| (Note 13) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 27 |
|
|
| 27 |
|
Balance, March 31, 2022 |
|
|
| $ | 3 |
|
| $ | 8,334 |
|
| $ | (4,772 | ) |
| $ | 1,119 |
|
| $ | 4,684 |
|
Three Months Ended September 30, 2023 (US$ millions) |
|
|
| Share |
|
| Paid in |
| Retained |
| Accumulated |
| Total |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balance, June 30, 2023 |
|
|
| $ | 3 |
|
| $ | 8,671 |
|
| $ | (401 | ) |
| $ | 1,043 |
|
| $ | 9,316 |
| |||
Net Earnings (Loss) |
|
|
|
| - |
|
|
| - |
|
|
| 406 |
|
|
| - |
|
|
| 406 |
| |||
Dividends on Shares of Common Stock ($0.30 per share) |
| (Note 13) |
|
| - |
|
|
| - |
|
|
| (82 | ) |
|
| - |
|
|
| (82 | ) | |||
Shares of Common Stock Purchased |
| (Note 13) |
|
| - |
|
|
| (45 | ) |
|
| - |
|
|
| - |
|
|
| (45 | ) | |||
Equity-Settled Compensation Costs |
|
|
|
| - |
|
|
| 18 |
|
|
| - |
|
|
| - |
|
|
| 18 |
| |||
Other Comprehensive Income (Loss) |
| (Note 14) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (61 | ) |
|
| (61 | ) | |||
Balance, September 30, 2023 |
|
|
| $ | 3 |
|
| $ | 8,644 |
|
| $ | (77 | ) |
| $ | 982 |
|
| $ | 9,552 |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Three Months Ended September 30, 2022 (US$ millions) |
|
|
| Share |
|
| Paid in |
| Retained |
| Accumulated |
| Total |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balance, June 30, 2022 |
|
|
| $ | 3 |
|
| $ | 8,239 |
|
| $ | (3,479 | ) |
| $ | 1,058 |
|
| $ | 5,821 |
| |||
Net Earnings (Loss) |
|
|
|
| - |
|
|
| - |
|
|
| 1,186 |
|
|
| - |
|
|
| 1,186 |
| |||
Dividends on Shares of Common Stock ($0.25 per share) |
| (Note 13) |
|
| - |
|
|
| - |
|
|
| (62 | ) |
|
| - |
|
|
| (62 | ) | |||
Shares of Common Stock Purchased |
| (Note 13) |
|
| - |
|
|
| (325 | ) |
|
| - |
|
|
| - |
|
|
| (325 | ) | |||
Equity-Settled Compensation Costs |
|
|
|
| - |
|
|
| 25 |
|
|
| - |
|
|
| - |
|
|
| 25 |
| |||
Other Comprehensive Income (Loss) |
| (Note 14) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (95 | ) |
|
| (95 | ) | |||
Balance, September 30, 2022 |
|
|
| $ | 3 |
|
| $ | 7,939 |
|
| $ | (2,355 | ) |
| $ | 963 |
|
| $ | 6,550 |
|
See accompanying Notes to the unaudited Condensed Consolidated Financial Statements
8
Condensed Consolidated Statement of Cash FlowsChanges in Shareholders’ Equity (unaudited)
|
|
|
| Three Months Ended |
| |||||
|
|
|
| March 31, |
| |||||
(US$ millions) |
|
|
| 2023 |
|
| 2022 |
| ||
|
|
|
|
|
|
|
|
| ||
Operating Activities |
|
|
|
|
|
|
|
| ||
Net earnings (loss) |
|
|
| $ | 487 |
|
| $ | (241 | ) |
Depreciation, depletion and amortization |
|
|
|
| 364 |
|
|
| 264 |
|
Accretion of asset retirement obligation |
|
|
|
| 5 |
|
|
| 5 |
|
Deferred income taxes |
| (Note 6) |
|
| 64 |
|
|
| (8 | ) |
Unrealized (gain) loss on risk management |
| (Note 18) |
|
| (18 | ) |
|
| 1,012 |
|
Unrealized foreign exchange (gain) loss |
| (Note 5) |
|
| (5 | ) |
|
| (3 | ) |
Foreign exchange on settlements |
| (Note 5) |
|
| (1 | ) |
|
| (1 | ) |
Other |
|
|
|
| (45 | ) |
|
| 15 |
|
Net change in other assets and liabilities |
|
|
|
| (5 | ) |
|
| (12 | ) |
Net change in non-cash working capital |
| (Note 19) |
|
| 222 |
|
|
| (346 | ) |
Cash From (Used in) Operating Activities |
|
|
|
| 1,068 |
|
|
| 685 |
|
|
|
|
|
|
|
|
|
| ||
Investing Activities |
|
|
|
|
|
|
|
| ||
Capital expenditures |
| (Note 2) |
|
| (610 | ) |
|
| (451 | ) |
Acquisitions |
| (Note 7) |
|
| (199 | ) |
|
| (15 | ) |
Proceeds from divestitures |
| (Note 7) |
|
| 12 |
|
|
| 1 |
|
Net change in investments and other |
|
|
|
| (66 | ) |
|
| 48 |
|
Cash From (Used in) Investing Activities |
|
|
|
| (863 | ) |
|
| (417 | ) |
|
|
|
|
|
|
|
|
| ||
Financing Activities |
|
|
|
|
|
|
|
| ||
Net issuance (repayment) of revolving long-term debt |
| (Note 10) |
|
| 187 |
|
|
| - |
|
Repayment of long-term debt |
| (Note 10) |
|
| - |
|
|
| (6 | ) |
Purchase of shares of common stock |
| (Note 12) |
|
| (239 | ) |
|
| (71 | ) |
Dividends on shares of common stock |
| (Note 12) |
|
| (61 | ) |
|
| (52 | ) |
Finance lease payments and other |
|
|
|
| (71 | ) |
|
| (64 | ) |
Cash From (Used in) Financing Activities |
|
|
|
| (184 | ) |
|
| (193 | ) |
|
|
|
|
|
|
|
|
| ||
Foreign Exchange Gain (Loss) on Cash, Cash Equivalents |
|
|
|
|
|
|
|
| ||
and Restricted Cash Held in Foreign Currency |
|
|
|
| - |
|
|
| 1 |
|
|
|
|
|
|
|
|
|
| ||
Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash |
|
| 21 |
|
|
| 76 |
| ||
Cash, Cash Equivalents and Restricted Cash, Beginning of Year |
|
| 5 |
|
|
| 195 |
| ||
Cash, Cash Equivalents and Restricted Cash, End of Period |
|
|
| $ | 26 |
|
| $ | 271 |
|
|
|
|
|
|
|
|
|
| ||
Cash, End of Period |
|
|
| $ | 6 |
|
| $ | 48 |
|
Cash Equivalents, End of Period |
|
|
|
| 20 |
|
|
| 223 |
|
Restricted Cash, End of Period |
|
|
|
| - |
|
|
| - |
|
Cash, Cash Equivalents and Restricted Cash, End of Period |
|
|
| $ | 26 |
|
| $ | 271 |
|
|
|
|
|
|
|
|
|
| ||
Supplementary Cash Flow Information |
| (Note 19) |
|
|
|
|
|
|
Nine Months Ended September 30, 2023 (US$ millions) |
|
|
| Share |
|
| Paid in |
| Retained |
| Accumulated |
| Total |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balance, December 31, 2022 |
|
|
| $ | 3 |
|
| $ | 7,776 |
|
| $ | (1,081 | ) |
| $ | 991 |
|
| $ | 7,689 |
| |||
Net Earnings (Loss) |
|
|
|
| - |
|
|
| - |
|
|
| 1,229 |
|
|
| - |
|
|
| 1,229 |
| |||
Dividends on Shares of Common Stock ($0.85 per share) |
| (Note 13) |
|
| - |
|
|
| - |
|
|
| (225 | ) |
|
| - |
|
|
| (225 | ) | |||
Shares of Common Stock Purchased |
| (Note 13) |
|
| - |
|
|
| (373 | ) |
|
| - |
|
|
| - |
|
|
| (373 | ) | |||
Shares of Common Stock Issued | (Notes 8, 13, 20) |
|
| - |
|
|
| 1,169 |
|
|
| - |
|
|
| - |
|
|
| 1,169 |
| ||||
Equity-Settled Compensation Costs |
|
|
|
| - |
|
|
| 72 |
|
|
| - |
|
|
| - |
|
|
| 72 |
| |||
Other Comprehensive Income (Loss) |
| (Note 14) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (9 | ) |
|
| (9 | ) | |||
Balance, September 30, 2023 |
|
|
| $ | 3 |
|
| $ | 8,644 |
|
| $ | (77 | ) |
| $ | 982 |
|
| $ | 9,552 |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Nine Months Ended September 30, 2022 (US$ millions) |
|
|
| Share |
|
| Paid in |
| Retained |
| Accumulated |
| Total |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balance, December 31, 2021 |
|
|
| $ | 3 |
|
| $ | 8,458 |
|
| $ | (4,479 | ) |
| $ | 1,092 |
|
| $ | 5,074 |
| |||
Net Earnings (Loss) |
|
|
|
| - |
|
|
| - |
|
|
| 2,302 |
|
|
| - |
|
|
| 2,302 |
| |||
Dividends on Shares of Common Stock ($0.70 per share) |
| (Note 13) |
|
| - |
|
|
| - |
|
|
| (178 | ) |
|
| - |
|
|
| (178 | ) | |||
Shares of Common Stock Purchased |
| (Note 13) |
|
| - |
|
|
| (531 | ) |
|
| - |
|
|
| - |
|
|
| (531 | ) | |||
Equity-Settled Compensation Costs |
|
|
|
| - |
|
|
| 12 |
|
|
| - |
|
|
| - |
|
|
| 12 |
| |||
Other Comprehensive Income (Loss) |
| (Note 14) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (129 | ) |
|
| (129 | ) | |||
Balance, September 30, 2022 |
|
|
| $ | 3 |
|
| $ | 7,939 |
|
| $ | (2,355 | ) |
| $ | 963 |
|
| $ | 6,550 |
|
See accompanying Notes to the unaudited Condensed Consolidated Financial Statements
9
Condensed Consolidated Statement of Cash Flows (unaudited)
|
|
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
|
|
| September 30, |
|
| September 30, |
| ||||||||||
(US$ millions) |
|
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net earnings (loss) |
|
|
| $ | 406 |
|
| $ | 1,186 |
|
| $ | 1,229 |
|
| $ | 2,302 |
|
Depreciation, depletion and amortization |
|
|
|
| 486 |
|
|
| 291 |
|
|
| 1,269 |
|
|
| 833 |
|
Accretion of asset retirement obligation |
|
|
|
| 5 |
|
|
| 4 |
|
|
| 14 |
|
|
| 14 |
|
Deferred income taxes |
| (Note 6) |
|
| (78 | ) |
|
| 88 |
|
|
| 33 |
|
|
| 138 |
|
Unrealized (gain) loss on risk management |
| (Note 19) |
|
| 292 |
|
|
| (710 | ) |
|
| 132 |
|
|
| (211 | ) |
Unrealized foreign exchange (gain) loss |
| (Note 5) |
|
| (19 | ) |
|
| 20 |
|
|
| (14 | ) |
|
| 24 |
|
Foreign exchange (gain) loss on settlements |
| (Note 5) |
|
| 2 |
|
|
| 12 |
|
|
| 5 |
|
|
| 11 |
|
Other |
|
|
|
| 18 |
|
|
| 57 |
|
|
| (6 | ) |
|
| 104 |
|
Net change in other assets and liabilities |
|
|
|
| (14 | ) |
|
| (17 | ) |
|
| (31 | ) |
|
| (42 | ) |
Net change in non-cash working capital |
| (Note 20) |
|
| (192 | ) |
|
| 31 |
|
|
| 174 |
|
|
| (182 | ) |
Cash From (Used in) Operating Activities |
|
|
|
| 906 |
|
|
| 962 |
|
|
| 2,805 |
|
|
| 2,991 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Capital expenditures |
| (Note 2) |
|
| (834 | ) |
|
| (511 | ) |
|
| (2,084 | ) |
|
| (1,473 | ) |
Acquisitions |
| (Note 7) |
|
| (59 | ) |
|
| (12 | ) |
|
| (273 | ) |
|
| (34 | ) |
Corporate acquisition, net of cash acquired |
| (Note 8) |
|
| - |
|
|
| - |
|
|
| (3,225 | ) |
|
| - |
|
Proceeds from divestitures |
| (Note 7) |
|
| 12 |
|
|
| 225 |
|
|
| 741 |
|
|
| 230 |
|
Net change in investments and other |
|
|
|
| 27 |
|
|
| 34 |
|
|
| 116 |
|
|
| 82 |
|
Cash From (Used in) Investing Activities |
|
|
|
| (854 | ) |
|
| (264 | ) |
|
| (4,725 | ) |
|
| (1,195 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net issuance (repayment) of revolving debt |
| (Note 11) |
|
| 29 |
|
|
| 225 |
|
|
| 316 |
|
|
| 440 |
|
Issuance of long-term debt |
| (Note 11) |
|
| - |
|
|
| - |
|
|
| 2,278 |
|
|
| - |
|
Repayment of long-term debt |
| (Note 11) |
|
| - |
|
|
| (525 | ) |
|
| - |
|
|
| (1,634 | ) |
Purchase of shares of common stock |
| (Note 13) |
|
| (45 | ) |
|
| (325 | ) |
|
| (373 | ) |
|
| (531 | ) |
Dividends on shares of common stock |
| (Note 13) |
|
| (82 | ) |
|
| (62 | ) |
|
| (225 | ) |
|
| (178 | ) |
Finance lease payments and other |
|
|
|
| (3 | ) |
|
| (2 | ) |
|
| (75 | ) |
|
| (68 | ) |
Cash From (Used in) Financing Activities |
|
|
|
| (101 | ) |
|
| (689 | ) |
|
| 1,921 |
|
|
| (1,971 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Foreign Exchange Gain (Loss) on Cash, Cash Equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
and Restricted Cash Held in Foreign Currency |
|
|
|
| - |
|
|
| 1 |
|
|
| (3 | ) |
|
| (2 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash |
|
| (49 | ) |
|
| 10 |
|
|
| (2 | ) |
|
| (177 | ) | ||
Cash, Cash Equivalents and Restricted Cash, Beginning of Period |
|
| 52 |
|
|
| 8 |
|
|
| 5 |
|
|
| 195 |
| ||
Cash, Cash Equivalents and Restricted Cash, End of Period |
|
|
| $ | 3 |
|
| $ | 18 |
|
| $ | 3 |
|
| $ | 18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash, End of Period |
|
|
| $ | 3 |
|
| $ | 12 |
|
| $ | 3 |
|
| $ | 12 |
|
Cash Equivalents, End of Period |
|
|
|
| - |
|
|
| 6 |
|
|
| - |
|
|
| 6 |
|
Restricted Cash, End of Period |
|
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Cash, Cash Equivalents and Restricted Cash, End of Period |
|
|
| $ | 3 |
|
| $ | 18 |
|
| $ | 3 |
|
| $ | 18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Supplementary Cash Flow Information |
| (Note 20) |
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to the unaudited Condensed Consolidated Financial Statements
10
1. | Basis of Presentation and Principles of Consolidation |
Ovintiv is in the business of the exploration for, the development of, and the production and marketing of oil, NGLs and natural gas.
The interim Condensed Consolidated Financial Statements include the accounts of Ovintiv and entities in which it holds a controlling interest. All intercompany balances and transactions are eliminated on consolidation. Undivided interests in oil and natural gas exploration and production joint ventures and partnerships are consolidated on a proportionate basis. Investments in non-controlled entities over which the Company has the ability to exercise significant influence are accounted for using the equity method.
The interim Condensed Consolidated Financial Statements are prepared in conformity with U.S. GAAP and the rules and regulations of the SEC. Pursuant to these rules and regulations, certain information and disclosures normally required under U.S. GAAP have been condensed or have been disclosed on an annual basis only. Accordingly, the interim Condensed Consolidated Financial Statements should be read in conjunction with the annual audited Consolidated Financial Statements and the notes thereto for the year ended December 31, 2022, which are included in Item 8 of Ovintiv’s 2022 Annual Report on Form 10‑K.
The interim Condensed Consolidated Financial Statements have been prepared following the same accounting policies and methods of computation as the annual audited Consolidated Financial Statements for the year ended December 31, 2022.
These unaudited interim Condensed Consolidated Financial Statements reflect, in the opinion of Management, all normal and recurring adjustments necessary to present fairly the financial position and results of the Company as at and for the periods presented. Interim condensed consolidated financial results are not necessarily indicative of consolidated financial results expected for the fiscal year.
2. | Segmented Information |
Ovintiv’s reportable segments are determined based on the following operations and geographic locations:
Corporate and Other mainly includes unrealized gains or losses recorded on derivative financial instruments. Once the instruments are settled, the realized gains and losses are recorded in the reporting segment to which the derivative instruments relate. Corporate and Other also includes amounts related to sublease rentals.
1011
Results of Operations (For the three months ended March 31)September 30)
Segment and Geographic Information
|
| USA Operations |
|
| Canadian Operations |
|
| Market Optimization |
|
| USA Operations |
|
| Canadian Operations |
|
| Market Optimization |
| ||||||||||||||||||||||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
| 2022 |
|
| 2023 |
| 2022 |
|
| 2023 |
| 2022 |
| |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Product and service revenues |
| $ | 1,186 |
|
| $ | 1,547 |
|
| $ | 690 |
|
| $ | 778 |
|
| $ | 716 |
|
| $ | 1,082 |
|
| $ | 1,545 |
|
| $ | 1,762 |
|
| $ | 505 |
|
| $ | 893 |
|
| $ | 863 |
|
| $ | 988 |
|
Gains (losses) on risk management, net |
|
| 2 |
|
|
| (219 | ) |
|
| (78 | ) |
|
| (227 | ) |
|
| - |
|
|
| - |
|
|
| (3 | ) |
|
| (324 | ) |
|
| 13 |
|
|
| (497 | ) |
|
| - |
|
|
| - |
|
Sublease revenues |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Total Revenues |
|
| 1,188 |
|
|
| 1,328 |
|
|
| 612 |
|
|
| 551 |
|
|
| 716 |
|
|
| 1,082 |
|
|
| 1,542 |
|
|
| 1,438 |
|
|
| 518 |
|
|
| 396 |
|
|
| 863 |
|
|
| 988 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Production, mineral and other taxes |
|
| 80 |
|
|
| 90 |
|
|
| 4 |
|
|
| 4 |
|
|
| - |
|
|
| - |
|
|
| 84 |
|
|
| 106 |
|
|
| 5 |
|
|
| 3 |
|
|
| - |
|
|
| - |
|
Transportation and processing |
|
| 147 |
|
|
| 135 |
|
|
| 267 |
|
|
| 231 |
|
|
| 41 |
|
|
| 40 |
|
|
| 124 |
|
|
| 170 |
|
|
| 265 |
|
|
| 257 |
|
|
| 44 |
|
|
| 41 |
|
Operating |
|
| 170 |
|
|
| 142 |
|
|
| 29 |
|
|
| 37 |
|
|
| 7 |
|
|
| 9 |
|
|
| 208 |
|
|
| 187 |
|
|
| 28 |
|
|
| 34 |
|
|
| 7 |
|
|
| 7 |
|
Purchased product |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 701 |
|
|
| 1,066 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 846 |
|
|
| 973 |
|
Depreciation, depletion and amortization |
|
| 294 |
|
|
| 200 |
|
|
| 65 |
|
|
| 59 |
|
|
| - |
|
|
| - |
|
|
| 409 |
|
|
| 225 |
|
|
| 72 |
|
|
| 61 |
|
|
| - |
|
|
| - |
|
Total Operating Expenses |
|
| 691 |
|
|
| 567 |
|
|
| 365 |
|
|
| 331 |
|
|
| 749 |
|
|
| 1,115 |
|
|
| 825 |
|
|
| 688 |
|
|
| 370 |
|
|
| 355 |
|
|
| 897 |
|
|
| 1,021 |
|
Operating Income (Loss) |
| $ | 497 |
|
| $ | 761 |
|
| $ | 247 |
|
| $ | 220 |
|
| $ | (33 | ) |
| $ | (33 | ) |
| $ | 717 |
|
| $ | 750 |
|
| $ | 148 |
|
| $ | 41 |
|
| $ | (34 | ) |
| $ | (33 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
|
|
| Corporate & Other |
|
| Consolidated |
|
|
|
|
| Corporate & Other |
|
| Consolidated |
| ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
|
|
|
|
|
| 2023 |
| 2022 |
|
| 2023 |
| 2022 |
| |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Product and service revenues |
|
|
|
|
|
|
| $ | - |
|
| $ | - |
|
| $ | 2,592 |
|
| $ | 3,407 |
|
|
|
|
|
|
|
| $ | - |
|
| $ | - |
|
| $ | 2,913 |
|
| $ | 3,643 |
| ||||
Gains (losses) on risk management, net |
|
|
|
|
|
|
|
| 18 |
|
|
| (1,012 | ) |
|
| (58 | ) |
|
| (1,458 | ) |
|
|
|
|
|
|
|
| (292 | ) |
|
| 710 |
|
|
| (282 | ) |
|
| (111 | ) | ||||
Sublease revenues |
|
|
|
|
|
|
|
| 17 |
|
|
| 18 |
|
|
| 17 |
|
|
| 18 |
|
|
|
|
|
|
|
|
| 18 |
|
|
| 17 |
|
|
| 18 |
|
|
| 17 |
| ||||
Total Revenues |
|
|
|
|
|
|
|
| 35 |
|
|
| (994 | ) |
|
| 2,551 |
|
|
| 1,967 |
|
|
|
|
|
|
|
|
| (274 | ) |
|
| 727 |
|
|
| 2,649 |
|
|
| 3,549 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Production, mineral and other taxes |
|
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| 84 |
|
|
| 94 |
|
|
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| 89 |
|
|
| 109 |
| ||||
Transportation and processing |
|
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| 455 |
|
|
| 406 |
|
|
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| 433 |
|
|
| 468 |
| ||||
Operating |
|
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| 206 |
|
|
| 188 |
|
|
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| 243 |
|
|
| 228 |
| ||||
Purchased product |
|
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| 701 |
|
|
| 1,066 |
|
|
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| 846 |
|
|
| 973 |
| ||||
Depreciation, depletion and amortization |
|
|
|
|
|
|
|
| 5 |
|
|
| 5 |
|
|
| 364 |
|
|
| 264 |
|
|
|
|
|
|
|
|
| 5 |
|
|
| 5 |
|
|
| 486 |
|
|
| 291 |
| ||||
Accretion of asset retirement obligation |
|
|
|
|
|
|
|
| 5 |
|
|
| 5 |
|
|
| 5 |
|
|
| 5 |
|
|
|
|
|
|
|
|
| 5 |
|
|
| 4 |
|
|
| 5 |
|
|
| 4 |
| ||||
Administrative |
|
|
|
|
|
|
|
| 58 |
|
|
| 144 |
|
|
| 58 |
|
|
| 144 |
|
|
|
|
|
|
|
|
| 80 |
|
|
| 103 |
|
|
| 80 |
|
|
| 103 |
| ||||
Total Operating Expenses |
|
|
|
|
|
|
|
| 68 |
|
|
| 154 |
|
|
| 1,873 |
|
|
| 2,167 |
|
|
|
|
|
|
|
|
| 90 |
|
|
| 112 |
|
|
| 2,182 |
|
|
| 2,176 |
| ||||
Operating Income (Loss) |
|
|
|
|
|
|
| $ | (33 | ) |
| $ | (1,148 | ) |
| $ | 678 |
|
|
| (200 | ) |
|
|
|
|
|
|
| $ | (364 | ) |
| $ | 615 |
|
|
| 467 |
|
|
| 1,373 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Other (Income) Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 71 |
|
|
| 74 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 98 |
|
|
| 83 |
| ||||||||
Foreign exchange (gain) loss, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (3 | ) |
|
| (1 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (22 | ) |
|
| 19 |
| ||||||||
Other (gains) losses, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (3 | ) |
|
| (27 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (2 | ) |
|
| (3 | ) | ||||||||
Total Other (Income) Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 65 |
|
|
| 46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 74 |
|
|
| 99 |
| ||||||||
Net Earnings (Loss) Before Income Tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 613 |
|
|
| (246 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 393 |
|
|
| 1,274 |
| ||||||||
Income tax expense (recovery) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 126 |
|
|
| (5 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (13 | ) |
|
| 88 |
| ||||||||
Net Earnings (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 487 |
|
| $ | (241 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 406 |
|
| $ | 1,186 |
|
1112
Results of Operations (For the nine months ended September 30)
Segment and Geographic Information
|
| USA Operations |
|
| Canadian Operations |
|
| Market Optimization |
| |||||||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Product and service revenues |
| $ | 3,912 |
|
| $ | 5,234 |
|
| $ | 1,663 |
|
| $ | 2,633 |
|
| $ | 2,282 |
|
| $ | 3,197 |
|
Gains (losses) on risk management, net |
|
| 4 |
|
|
| (926 | ) |
|
| (65 | ) |
|
| (1,149 | ) |
|
| - |
|
|
| - |
|
Sublease revenues |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Total Revenues |
|
| 3,916 |
|
|
| 4,308 |
|
|
| 1,598 |
|
|
| 1,484 |
|
|
| 2,282 |
|
|
| 3,197 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Production, mineral and other taxes |
|
| 237 |
|
|
| 311 |
|
|
| 12 |
|
|
| 10 |
|
|
| - |
|
|
| - |
|
Transportation and processing |
|
| 419 |
|
|
| 464 |
|
|
| 800 |
|
|
| 741 |
|
|
| 121 |
|
|
| 122 |
|
Operating |
|
| 545 |
|
|
| 478 |
|
|
| 59 |
|
|
| 96 |
|
|
| 20 |
|
|
| 22 |
|
Purchased product |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 2,239 |
|
|
| 3,154 |
|
Depreciation, depletion and amortization |
|
| 1,039 |
|
|
| 642 |
|
|
| 215 |
|
|
| 176 |
|
|
| - |
|
|
| - |
|
Total Operating Expenses |
|
| 2,240 |
|
|
| 1,895 |
|
|
| 1,086 |
|
|
| 1,023 |
|
|
| 2,380 |
|
|
| 3,298 |
|
Operating Income (Loss) |
| $ | 1,676 |
|
| $ | 2,413 |
|
| $ | 512 |
|
| $ | 461 |
|
| $ | (98 | ) |
| $ | (101 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
| Corporate & Other |
|
| Consolidated |
| |||||||||||||||
|
|
|
|
|
|
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Product and service revenues |
|
|
|
|
|
|
| $ | - |
|
| $ | - |
|
| $ | 7,857 |
|
| $ | 11,064 |
| ||
Gains (losses) on risk management, net |
|
|
|
|
|
|
|
| (132 | ) |
|
| 211 |
|
|
| (193 | ) |
|
| (1,864 | ) | ||
Sublease revenues |
|
|
|
|
|
|
|
| 53 |
|
|
| 52 |
|
|
| 53 |
|
|
| 52 |
| ||
Total Revenues |
|
|
|
|
|
|
|
| (79 | ) |
|
| 263 |
|
|
| 7,717 |
|
|
| 9,252 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Production, mineral and other taxes |
|
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| 249 |
|
|
| 321 |
| ||
Transportation and processing |
|
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| 1,340 |
|
|
| 1,327 |
| ||
Operating |
|
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| 624 |
|
|
| 596 |
| ||
Purchased product |
|
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| 2,239 |
|
|
| 3,154 |
| ||
Depreciation, depletion and amortization |
|
|
|
|
|
|
|
| 15 |
|
|
| 15 |
|
|
| 1,269 |
|
|
| 833 |
| ||
Accretion of asset retirement obligation |
|
|
|
|
|
|
|
| 14 |
|
|
| 14 |
|
|
| 14 |
|
|
| 14 |
| ||
Administrative |
|
|
|
|
|
|
|
| 306 |
|
|
| 318 |
|
|
| 306 |
|
|
| 318 |
| ||
Total Operating Expenses |
|
|
|
|
|
|
|
| 335 |
|
|
| 347 |
|
|
| 6,041 |
|
|
| 6,563 |
| ||
Operating Income (Loss) |
|
|
|
|
|
|
| $ | (414 | ) |
| $ | (84 | ) |
|
| 1,676 |
|
|
| 2,689 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Other (Income) Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 249 |
|
|
| 248 |
| ||||
Foreign exchange (gain) loss, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
|
| 21 |
| ||||
Other (gains) losses, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (16 | ) |
|
| (30 | ) | ||||
Total Other (Income) Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 233 |
|
|
| 239 |
| ||||
Net Earnings (Loss) Before Income Tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,443 |
|
|
| 2,450 |
| ||||
Income tax expense (recovery) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 214 |
|
|
| 148 |
| ||||
Net Earnings (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 1,229 |
|
| $ | 2,302 |
|
13
Intersegment Information
|
|
|
|
|
|
| Market Optimization |
|
|
|
|
|
|
|
|
|
|
|
| Market Optimization |
|
|
|
|
|
| ||||||||||||||||||||||
|
| Marketing Sales |
|
| Upstream Eliminations |
|
| Total |
|
| Marketing Sales |
|
| Upstream Eliminations |
|
| Total |
| ||||||||||||||||||||||||||||||
For the three months ended March 31, |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||||||||||||||||||||||||
For the three months ended September 30, |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Revenues |
| $ | 3,136 |
|
| $ | 3,423 |
|
| $ | (2,420 | ) |
| $ | (2,341 | ) |
| $ | 716 |
|
| $ | 1,082 |
|
| $ | 2,811 |
|
| $ | 4,109 |
|
| $ | (1,948 | ) |
| $ | (3,121 | ) |
| $ | 863 |
|
| $ | 988 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Transportation and processing |
|
| 165 |
|
|
| 152 |
|
|
| (124 | ) |
|
| (112 | ) |
|
| 41 |
|
|
| 40 |
|
|
| 183 |
|
|
| 164 |
|
|
| (139 | ) |
|
| (123 | ) |
|
| 44 |
|
|
| 41 |
|
Operating |
|
| 7 |
|
|
| 9 |
|
|
| - |
|
|
| - |
|
|
| 7 |
|
|
| 9 |
|
|
| 7 |
|
|
| 7 |
|
|
| - |
|
|
| - |
|
|
| 7 |
|
|
| 7 |
|
Purchased product |
|
| 2,997 |
|
|
| 3,295 |
|
|
| (2,296 | ) |
|
| (2,229 | ) |
|
| 701 |
|
|
| 1,066 |
|
|
| 2,655 |
|
|
| 3,972 |
|
|
| (1,809 | ) |
|
| (2,999 | ) |
|
| 846 |
|
|
| 973 |
|
Operating Income (Loss) |
| $ | (33 | ) |
| $ | (33 | ) |
| $ | - |
|
| $ | - |
|
| $ | (33 | ) |
| $ | (33 | ) |
| $ | (34 | ) |
| $ | (34 | ) |
| $ | - |
|
| $ | 1 |
|
| $ | (34 | ) |
| $ | (33 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
| Market Optimization |
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||
|
| Marketing Sales |
|
| Upstream Eliminations |
|
| Total |
| |||||||||||||||||||||||||||||||||||||||
For the nine months ended September 30, |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
Revenues |
| $ | 8,821 |
|
| $ | 11,878 |
|
| $ | (6,539 | ) |
| $ | (8,681 | ) |
| $ | 2,282 |
|
| $ | 3,197 |
| ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
Transportation and processing |
|
| 528 |
|
|
| 477 |
|
|
| (407 | ) |
|
| (355 | ) |
|
| 121 |
|
|
| 122 |
| ||||||||||||||||||||||||
Operating |
|
| 20 |
|
|
| 22 |
|
|
| - |
|
|
| - |
|
|
| 20 |
|
|
| 22 |
| ||||||||||||||||||||||||
Purchased product |
|
| 8,371 |
|
|
| 11,480 |
|
|
| (6,132 | ) |
|
| (8,326 | ) |
|
| 2,239 |
|
|
| 3,154 |
| ||||||||||||||||||||||||
Operating Income (Loss) |
| $ | (98 | ) |
| $ | (101 | ) |
| $ | - |
|
| $ | - |
|
| $ | (98 | ) |
| $ | (101 | ) |
Capital Expenditures by Segment
|
|
|
|
|
| Three Months Ended |
|
|
|
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||||
|
|
|
|
|
| March 31, |
|
|
|
|
|
| September 30, |
|
| September 30, |
| |||||||||||||||
|
|
|
|
|
| 2023 |
|
| 2022 |
|
|
|
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
USA Operations |
|
|
|
|
| $ | 467 |
|
| $ | 372 |
|
|
|
|
|
| $ | 695 |
|
| $ | 416 |
|
| $ | 1,664 |
|
| $ | 1,198 |
|
Canadian Operations |
|
|
|
|
|
| 142 |
|
|
| 78 |
|
|
|
|
|
|
| 136 |
|
|
| 95 |
|
|
| 415 |
|
|
| 274 |
|
Corporate & Other |
|
|
|
|
|
| 1 |
|
|
| 1 |
|
|
|
|
|
|
| 3 |
|
|
| - |
|
|
| 5 |
|
|
| 1 |
|
|
|
|
|
|
| $ | 610 |
|
| $ | 451 |
|
|
|
|
|
| $ | 834 |
|
| $ | 511 |
|
| $ | 2,084 |
|
| $ | 1,473 |
|
Goodwill, Property, Plant and Equipment and Total Assets by Segment
|
| Goodwill |
|
| Property, Plant and Equipment |
|
| Total Assets |
|
| Goodwill |
|
| Property, Plant and Equipment |
|
| Total Assets |
| ||||||||||||||||||||||||||||||
|
| As at |
|
| As at |
|
| As at |
|
| As at |
|
| As at |
|
| As at |
| ||||||||||||||||||||||||||||||
|
| March 31, |
|
| December 31, |
|
| March 31, |
|
| December 31, |
|
| March 31, |
|
| December 31, |
|
| September 30, |
|
| December 31, |
|
| September 30, |
|
| December 31, |
|
| September 30, |
|
| December 31, |
| ||||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
USA Operations |
| $ | 1,938 |
|
| $ | 1,938 |
|
| $ | 8,619 |
|
| $ | 8,259 |
|
| $ | 11,375 |
|
| $ | 11,043 |
|
| $ | 1,938 |
|
| $ | 1,938 |
|
| $ | 13,103 |
|
| $ | 8,259 |
|
| $ | 16,077 |
|
| $ | 11,043 |
|
Canadian Operations |
|
| 646 |
|
|
| 646 |
|
|
| 1,131 |
|
|
| 1,044 |
|
|
| 2,039 |
|
|
| 2,075 |
|
|
| 647 |
|
|
| 646 |
|
|
| 1,256 |
|
|
| 1,044 |
|
|
| 2,198 |
|
|
| 2,075 |
|
Market Optimization |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 312 |
|
|
| 446 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 320 |
|
|
| 446 |
|
Corporate & Other |
|
| - |
|
|
| - |
|
|
| 161 |
|
|
| 165 |
|
|
| 1,397 |
|
|
| 1,492 |
|
|
| - |
|
|
| - |
|
|
| 156 |
|
|
| 165 |
|
|
| 1,305 |
|
|
| 1,492 |
|
|
| $ | 2,584 |
|
| $ | 2,584 |
|
| $ | 9,911 |
|
| $ | 9,468 |
|
| $ | 15,123 |
|
| $ | 15,056 |
|
| $ | 2,585 |
|
| $ | 2,584 |
|
| $ | 14,515 |
|
| $ | 9,468 |
|
| $ | 19,900 |
|
| $ | 15,056 |
|
1214
3. | Revenues from Contracts with Customers |
The following table summarizes Ovintiv’s revenues from contracts with customers.
Revenues (For the three months ended March 31)September 30)
|
| USA Operations |
|
| Canadian Operations |
|
| Market Optimization |
|
| USA Operations |
|
| Canadian Operations |
|
| Market Optimization |
| ||||||||||||||||||||||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Revenues from Customers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Product revenues (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Oil |
| $ | 851 |
|
| $ | 1,080 |
|
| $ | - |
|
| $ | - |
|
| $ | 609 |
|
| $ | 886 |
|
| $ | 1,270 |
|
| $ | 1,146 |
|
| $ | 2 |
|
| $ | 1 |
|
| $ | 800 |
|
| $ | 844 |
|
NGLs |
|
| 184 |
|
|
| 267 |
|
|
| 237 |
|
|
| 362 |
|
|
| 20 |
|
|
| 3 |
|
|
| 175 |
|
|
| 271 |
|
|
| 260 |
|
|
| 327 |
|
|
| - |
|
|
| 2 |
|
Natural gas |
|
| 155 |
|
|
| 206 |
|
|
| 455 |
|
|
| 419 |
|
|
| 80 |
|
|
| 183 |
|
|
| 103 |
|
|
| 348 |
|
|
| 246 |
|
|
| 565 |
|
|
| 56 |
|
|
| 137 |
|
Service revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Gathering and processing |
|
| - |
|
|
| - |
|
|
| 1 |
|
|
| 1 |
|
|
| - |
|
|
| - |
|
|
| 1 |
|
|
| - |
|
|
| - |
|
|
| 2 |
|
|
| - |
|
|
| - |
|
Product and Service Revenues |
| $ | 1,190 |
|
| $ | 1,553 |
|
| $ | 693 |
|
| $ | 782 |
|
| $ | 709 |
|
| $ | 1,072 |
|
| $ | 1,549 |
|
| $ | 1,765 |
|
| $ | 508 |
|
| $ | 895 |
|
| $ | 856 |
|
| $ | 983 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
|
| Corporate & Other |
|
| Consolidated |
|
|
|
| Corporate & Other |
|
| Consolidated |
| ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| 2023 |
| 2022 |
|
| 2023 |
| 2022 |
|
|
|
|
|
|
|
| 2023 |
| 2022 |
|
| 2023 |
| 2022 |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Revenues from Customers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Product revenues (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Oil |
|
|
|
|
|
|
| $ | - |
|
| $ | - |
|
| $ | 1,460 |
|
| $ | 1,966 |
|
|
|
|
|
|
|
| $ | - |
|
| $ | - |
|
| $ | 2,072 |
|
| $ | 1,991 |
| ||||
NGLs |
|
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| 441 |
|
|
| 632 |
|
|
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| 435 |
|
|
| 600 |
| ||||
Natural gas |
|
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| 690 |
|
|
| 808 |
|
|
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| 405 |
|
|
| 1,050 |
| ||||
Service revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Gathering and processing |
|
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| 1 |
|
|
| 1 |
|
|
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| 1 |
|
|
| 2 |
| ||||
Product and Service Revenues |
|
|
|
|
|
|
| $ | - |
|
| $ | - |
|
| $ | 2,592 |
|
| $ | 3,407 |
|
|
|
|
|
|
|
| $ | - |
|
| $ | - |
|
| $ | 2,913 |
|
| $ | 3,643 |
|
Revenues (For the nine months ended September 30)
|
| USA Operations |
|
| Canadian Operations |
|
| Market Optimization |
| |||||||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Revenues from Customers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Product revenues (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Oil |
| $ | 3,068 |
|
| $ | 3,539 |
|
| $ | 2 |
|
| $ | 2 |
|
| $ | 2,053 |
|
| $ | 2,661 |
|
NGLs |
|
| 508 |
|
|
| 850 |
|
|
| 743 |
|
|
| 1,072 |
|
|
| 25 |
|
|
| 13 |
|
Natural gas |
|
| 344 |
|
|
| 856 |
|
|
| 924 |
|
|
| 1,565 |
|
|
| 185 |
|
|
| 503 |
|
Service revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Gathering and processing |
|
| 3 |
|
|
| 1 |
|
|
| 2 |
|
|
| 2 |
|
|
| - |
|
|
| - |
|
Product and Service Revenues |
| $ | 3,923 |
|
| $ | 5,246 |
|
| $ | 1,671 |
|
| $ | 2,641 |
|
| $ | 2,263 |
|
| $ | 3,177 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
| Corporate & Other |
|
| Consolidated |
| |||||||||||||||
|
|
|
|
|
|
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Revenues from Customers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Product revenues (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Oil |
|
|
|
|
|
|
| $ | - |
|
| $ | - |
|
| $ | 5,123 |
|
| $ | 6,202 |
| ||
NGLs |
|
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| 1,276 |
|
|
| 1,935 |
| ||
Natural gas |
|
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| 1,453 |
|
|
| 2,924 |
| ||
Service revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Gathering and processing |
|
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| 5 |
|
|
| 3 |
| ||
Product and Service Revenues |
|
|
|
|
|
|
| $ | - |
|
| $ | - |
|
| $ | 7,857 |
|
| $ | 11,064 |
|
15
The Company’s revenues from contracts with customers consists of product sales including oil, NGLs and natural gas, as well as the provision of gathering and processing services to third parties. Ovintiv had no contract asset or liability balances during the periods presented. As at March 31,September 30, 2023, receivables and accrued revenues from contracts with customers were $9151,143 million ($1,257 million as at December 31, 2022).
Ovintiv’s product sales are sold under short-term contracts with terms that are less than one year at either fixed or market index prices or under long-term contracts exceeding one year at market index prices.
The Company’s gathering and processing services are provided on an interruptible basis with transaction prices that are for fixed prices and/or variable consideration. Variable consideration received is related to recovery of plant operating costs or escalation of the fixed price based on a consumer price index. As the service contracts are interruptible, with service provided on an “as available” basis, there are no unsatisfied performance obligations remaining at March 31,September 30, 2023.
As at March 31,September 30, 2023, all remaining performance obligations are priced at market index prices or are variable volume delivery contracts. As such, the variable consideration is allocated entirely to the wholly unsatisfied performance obligation or promise to deliver units of production, and revenue is recognized at the amount for which the Company has the right to invoice the product delivered. As the period between when the product sales are transferred and Ovintiv receives payments is generally 30 to 60 days, there is no financing element associated with customer contracts. In addition, Ovintiv does not disclose unsatisfied performance obligations for customer contracts with terms less than 12 months or for variable consideration related to unsatisfied performance obligations.
13
4. | Interest |
|
| Three Months Ended |
|
| Three Months Ended |
|
| Nine Months Ended |
| |||||||||||||||
|
| March 31, |
|
| September 30, |
|
| September 30, |
| |||||||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
| 2022 |
|
| 2023 |
| 2022 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Interest Expense on: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Debt |
| $ | 60 |
|
| $ | 70 |
|
| $ | 105 |
|
| $ | 79 |
|
| $ | 242 |
|
| $ | 237 |
|
Finance leases |
|
| - |
|
|
| 1 |
|
|
| 1 |
|
|
| 2 |
| ||||||||
Other |
|
| 11 |
|
|
| 4 |
|
|
| (7 | ) |
|
| 3 |
|
|
| 6 |
|
|
| 9 |
|
|
| $ | 71 |
|
| $ | 74 |
|
| $ | 98 |
|
| $ | 83 |
|
| $ | 249 |
|
| $ | 248 |
|
For the three and nine months September 30, 2022, interest expense on debt includes $22 million related to premiums paid to repurchase certain of the Company’s senior notes in the open market as discussed in Note 11. Additionally, interest expense on debt for the nine months ended September 30, 2022, includes a make-whole interest payment of $47 million resulting from the early redemption of certain of the Company’s senior notes and $30 million in non-cash fair value amortization related to the redemption of those senior notes which were previously acquired through a business combination (see Note 11).
5. | Foreign Exchange (Gain) Loss, Net |
|
| Three Months Ended |
|
| Three Months Ended |
|
| Nine Months Ended |
| |||||||||||||||
|
| March 31, |
|
| September 30, |
|
| September 30, |
| |||||||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
| 2022 |
|
| 2023 |
| 2022 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Unrealized Foreign Exchange (Gain) Loss on: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Translation of U.S. dollar risk management contracts issued from Canada |
| $ | (6 | ) |
| $ | (3 | ) |
| $ | 6 |
|
| $ | 20 |
|
| $ | (9 | ) |
| $ | 24 |
|
Translation of intercompany notes |
|
| 1 |
|
|
| - |
|
|
| (25 | ) |
|
| - |
|
|
| (5 | ) |
|
| - |
|
|
|
| (5 | ) |
|
| (3 | ) |
|
| (19 | ) |
|
| 20 |
|
|
| (14 | ) |
|
| 24 |
|
Foreign Exchange (Gain) Loss on Settlements of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
U.S. dollar financing debt issued from Canada |
|
| (1 | ) |
|
| (1 | ) |
|
| - |
|
|
| 12 |
|
|
| (2 | ) |
|
| 11 |
|
U.S. dollar risk management contracts issued from Canada |
|
| 4 |
|
|
| (1 | ) |
|
| - |
|
|
| 1 |
|
|
| 7 |
|
|
| (1 | ) |
Intercompany notes |
|
| 2 |
|
|
| - |
|
|
| 7 |
|
|
| - |
| ||||||||
Other Monetary Revaluations |
|
| (1 | ) |
|
| 4 |
|
|
| (5 | ) |
|
| (14 | ) |
|
| 2 |
|
|
| (13 | ) |
|
| $ | (3 | ) |
| $ | (1 | ) |
| $ | (22 | ) |
| $ | 19 |
|
| $ | - |
|
| $ | 21 |
|
16
6. | Income Taxes |
|
| Three Months Ended |
|
| Three Months Ended |
|
| Nine Months Ended |
| |||||||||||||||
|
| March 31, |
|
| September 30, |
|
| September 30, |
| |||||||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
| 2022 |
|
| 2023 |
| 2022 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Current Tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
United States |
| $ | - |
|
| $ | 3 |
|
| $ | 3 |
|
| $ | - |
|
| $ | 11 |
|
| $ | 10 |
|
Canada |
|
| 62 |
|
|
| - |
|
|
| 62 |
|
|
| - |
|
|
| 170 |
|
|
| - |
|
Total Current Tax Expense (Recovery) |
|
| 62 |
|
|
| 3 |
|
|
| 65 |
|
|
| - |
|
|
| 181 |
|
|
| 10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Deferred Tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
United States |
|
| 72 |
|
|
| (17 | ) |
|
| (56 | ) |
|
| 44 |
|
|
| 81 |
|
|
| 44 |
|
Canada |
|
| (8 | ) |
|
| 9 |
|
|
| (22 | ) |
|
| 44 |
|
|
| (48 | ) |
|
| 94 |
|
Total Deferred Tax Expense (Recovery) |
|
| 64 |
|
|
| (8 | ) |
|
| (78 | ) |
|
| 88 |
|
|
| 33 |
|
|
| 138 |
|
Income Tax Expense (Recovery) |
| $ | 126 |
|
| $ | (5 | ) |
| $ | (13 | ) |
| $ | 88 |
|
| $ | 214 |
|
| $ | 148 |
|
Effective Tax Rate |
|
| 20.6 | % |
|
| 2.0 | % |
|
| (3.3 | %) |
|
| 6.9 | % |
|
| 14.8 | % |
|
| 6.0 | % |
Ovintiv’s interim income tax expense is determined using the estimated annual effective income tax rate applied to year-to-date net earnings before income tax plus the effect of legislative changes and amounts in respect of prior periods. The estimated annual effective income tax rate is impacted by expected annual earnings, changes in valuation allowances, income tax related to foreign operations, state taxes, the effect of legislative changes, non-taxable items and tax differences on transactions, which can produce interim effective tax rate fluctuations.
During the three and nine months ended March 31,September 30, 2023, the current income tax expense was primarily due to the expected full utilization of Ovintiv's CanadianOvintiv’s operating losses in Canada, resulting in Canadian current tax in 2023. During the nine months ended September 30, 2022, the current income tax expense in the United States was primarily due to state taxes.
During the three months ended March 31,September 30, 2023, the deferred tax recovery was primarily due to the recognition of U.S. federal and state research and development credits of $107 million and $15 million, respectively, associated with eligible drilling and completions costs incurred in prior years. During the nine months ended September 30, 2023, the deferred tax expense was primarily due to the annual effective tax rate applied to the U.S. earnings.earnings, partially offset by the research and development credits discussed above.
The Company recognizes tax benefits from uncertain tax positions only if it is more likely than not the tax position will be sustained upon audit by the taxing authorities. During the three months ended March September 30, 2023, the Company recorded unrecognized U.S. federal and state tax benefits of $110 million and $31 million, respectively, resulting from research and development expenditures related to drilling and completions costs incurred in prior years. If all, or a portion of, the unrecognized tax benefit is sustained upon examination by the taxing authorities, the tax benefit will be recognized as a reduction to the Company’s deferred tax liability and will affect the Company’s effective tax rate in the period recognized.
During the three and nine months ended September 30, 2022, the deferred tax recoveryexpense was due to the lower annual effective income tax rate applied to jurisdictional earnings.
14
The effective tax rate of 2.014.8 percent for the threenine months ended March 31,September 30, 2023, is lower than the U.S. federal statutory rate of 21 percent primarily due to the recognition of research and development credits described above. The effective tax rate of 6.0 percent for the nine months ended September 30, 2022, was lower than the U.S. federal statutory tax rate of 21 percent primarily due to the lower annual effective income tax rate resulting from a reduction in valuation allowances.
17
7. | Acquisitions and Divestitures |
|
| Three Months Ended |
|
| Three Months Ended |
|
| Nine Months Ended |
| |||||||||||||||
|
| March 31, |
|
| September 30, |
|
| September 30, |
| |||||||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
| 2022 |
|
| 2023 |
| 2022 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Acquisitions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
USA Operations |
| $ | 193 |
|
| $ | 15 |
|
| $ | 59 |
|
| $ | 12 |
|
| $ | 267 |
|
| $ | 34 |
|
Canadian Operations |
|
| 6 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 6 |
|
|
| - |
|
Total Acquisitions |
|
| 199 |
|
|
| 15 |
|
|
| 59 |
|
|
| 12 |
|
|
| 273 |
|
|
| 34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Divestitures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
USA Operations |
|
| (12 | ) |
|
| (1 | ) |
|
| (11 | ) |
|
| (226 | ) |
|
| (741 | ) |
|
| (229 | ) |
Canadian Operations |
|
| (1 | ) |
|
| 1 |
|
|
| - |
|
|
| (1 | ) | ||||||||
Total Divestitures |
|
| (12 | ) |
|
| (1 | ) |
|
| (12 | ) |
|
| (225 | ) |
|
| (741 | ) |
|
| (230 | ) |
Net Acquisitions & (Divestitures) |
| $ | 187 |
|
| $ | 14 |
|
| $ | 47 |
|
| $ | (213 | ) |
| $ | (468 | ) |
| $ | (196 | ) |
Acquisitions
For the three months ended March 31,September 30, 2023, acquisitions in the USA Operations were $19359 million, (2022 -which primarily included property purchases in Permian with oil and liquids rich potential. For the nine months ended September 30, 2023, acquisitions in the USA Operations were $15267 million),million, which primarily included property purchases in Permian and Uinta with oil and liquids rich potential.
For the three and nine months ended March 31, 2023,September 30, 2022, acquisitions in the CanadianUSA Operations were $612 million and $34 million, respectively, which primarily included property purchases with oil and liquids rich potential.
Divestitures
For the threenine months ended March 31,September 30, 2023, divestitures in the USA Operations were $12741 million which primarily included the sale of certain properties that did not complement Ovintiv's existing portfolioBakken located in North Dakota for proceeds of assets.approximately $717 million, after closing and other adjustments. For the three and nine months ended September 30, 2022, divestitures in the USA Operations were $226 million and $229 million, respectively, which primarily included the sales of portions of Uinta located in northeastern Utah and Bakken located in northeastern Montana for combined proceeds of approximately $215 million, after closing and other adjustments.
Amounts received from the Company’s divestiture transactions have been deducted from the respective U.S. and Canadian full cost pools.
8. | Business Combination |
15
Acquisition of Midland Basin Assets (“Permian Acquisition”)
On June 12, 2023, Ovintiv completed a business combination to purchase all of the outstanding equity interests in seven Delaware limited liability companies (“Permian LLCs”) pursuant to the purchase agreement with Black Swan Oil & Gas, LLC, PetroLegacy II Holdings, LLC, Piedra Energy III Holdings, LLC and Piedra Energy IV Holdings, LLC, which are portfolio companies of funds managed by EnCap Investments L.P (“EnCap”). The Company paid aggregate cash consideration of approximately $3.2 billion and issued approximately 31.8 million shares of Ovintiv common stock, representing a value of approximately $1.2 billion, subject to final closing adjustments under the purchase agreement. The cash portion of the consideration was funded through a combination of net proceeds from the Company’s May 2023 senior notes offering (see Note 11), net proceeds from the sale of Bakken (see Note 7), cash on hand and proceeds from short-term borrowings. Transaction costs of approximately $77 million were included in administrative expense.
The acquisition is strategically located in close proximity to Ovintiv’s current Permian operations and adds approximately 1,050 net well locations to Ovintiv’s existing Permian inventory and approximately 65,000 net acres. The assets acquired generated revenues of $519 million and direct operating expenses of $104 million for the period from June 12, 2023, to September 30, 2023. The results of operations from the acquired Permian assets have been included in Ovintiv’s consolidated financial statements as of June 12, 2023.
18
Purchase Price Allocation
The Permian LLCs have been accounted for under the acquisition method and as a single transaction because the purchase agreement was entered into at the same time with EnCap and in contemplation of one another to achieve an overall economic effect. The purchase price allocations represent the consideration paid and the fair values of the assets acquired, and liabilities assumed as of the acquisition date.
The preliminary purchase price allocation was based on the initial valuations from estimates and assumptions that management believes are reasonable. These will be subject to change based on the determination of the final closing adjustments and when the remaining information necessary to complete the valuation is obtained. The Company expects the purchase price allocation to be completed within 12 months following the acquisition date, during which time the value of net assets and liabilities acquired may be revised as appropriate.
Preliminary Purchase Price Allocation |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| |
Consideration: |
|
|
|
|
|
|
|
| |
Fair value of shares of Ovintiv common stock issued (1) |
|
|
|
|
|
| $ | 1,169 |
|
Consideration paid in cash |
|
|
|
|
|
|
| 3,241 |
|
Total Consideration |
|
|
|
|
|
| $ | 4,410 |
|
|
|
|
|
|
|
|
|
| |
Assets Acquired: |
|
|
|
|
|
|
|
| |
Cash and cash equivalents |
|
|
|
|
|
| $ | 16 |
|
Accounts receivable and accrued revenues (2) |
|
|
|
|
|
|
| 201 |
|
Proved properties (2) |
|
|
|
|
|
|
| 3,727 |
|
Unproved properties (2) |
|
|
|
|
|
|
| 929 |
|
Other property, plant and equipment |
|
|
|
|
|
|
| 33 |
|
|
|
|
|
|
|
|
|
| |
Liabilities Assumed: |
|
|
|
|
|
|
|
| |
Accounts payable and accrued liabilities (2) |
|
|
|
|
|
|
| (462 | ) |
Asset retirement obligation |
|
|
|
|
|
|
| (28 | ) |
Other liabilities and provisions |
|
|
|
|
|
|
| (6 | ) |
Total Purchase Price |
|
|
|
|
|
| $ | 4,410 |
|
The Company used the income approach valuation technique for the fair value of assets acquired and liabilities assumed. The carrying amounts of cash, accounts receivable and accounts payable approximate their fair values due to their nature and/or short-term maturity of the instruments. The fair value of tubular inventory in other property, plant and equipment was based on the cost approach, which utilized asset listings and cost records with consideration for the relative age, condition, utilization and economic support of the inventory. The fair values of the proved properties, unproved properties and asset retirement obligation were categorized within Level 3 and were determined using relevant market assumptions, including discount rates, future commodity prices and costs, timing of development activities, projections of oil and gas reserves, and estimates to abandon and reclaim producing wells. Level 3 inputs require significant judgement and estimates to be made.
For income tax purposes, the Permian Acquisition is treated as an asset purchase, and as a result, the tax basis in the assets and liabilities reflect their allocated fair value.
Unaudited Pro Forma Financial Information
The following unaudited pro forma financial information combines the historical financial results of Ovintiv with the Permian LLCs and has been prepared as though the acquisition and the associated debt issuance described in Note 11 had occurred on January 1, 2022. The pro forma information is not intended to reflect the actual results of operations that would have occurred if the Permian Acquisition had been completed at the date indicated. In addition, the pro forma information is not intended to be a projection of Ovintiv’s results of operations for any future period.
19
Additionally, pro forma earnings were adjusted to exclude acquisition-related costs incurred of approximately $77 million for the nine months ended September 30, 2023, and 2022. The pro forma financial information does not include any cost savings or other synergies that may result from the acquisition or any estimated costs that have been or will be incurred to integrate the assets. The pro forma financial data does not include the results of operations for any other acquisitions made during the periods presented, as they were primarily acreage acquisitions, and their results were not deemed material.
|
|
| Three Months Ended |
|
| Nine Months Ended |
| |||||||
|
|
|
| September 30, |
|
| September 30, |
| ||||||
(US$ millions, except per share amounts) |
|
|
| 2022 |
|
| 2023 |
|
| 2022 |
| |||
|
|
|
|
|
|
|
|
|
|
|
| |||
Revenues |
|
|
| $ | 3,852 |
|
| $ | 8,319 |
|
| $ | 9,852 |
|
Net Earnings (Loss) |
|
|
| $ | 1,300 |
|
| $ | 1,455 |
|
| $ | 2,401 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Net Earnings (Loss) per Share of Common Stock |
|
|
|
|
|
|
|
|
|
|
| |||
Basic |
|
|
| $ | 4.57 |
|
| $ | 5.29 |
|
| $ | 8.35 |
|
Diluted |
|
|
|
| 4.51 |
|
|
| 5.21 |
|
|
| 8.22 |
|
| Property, Plant and Equipment, Net |
|
| As at March 31, 2023 |
|
| As at December 31, 2022 |
|
| As at September 30, 2023 |
|
| As at December 31, 2022 |
| ||||||||||||||||||||||||||||||||||||
|
|
|
|
| Accumulated |
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
| Accumulated |
|
|
|
| ||||||||||||||
|
| Cost |
|
| DD&A |
|
| Net |
|
| Cost |
|
| DD&A |
|
| Net |
|
| Cost |
|
| DD&A |
|
| Net |
|
| Cost |
|
| DD&A |
|
| Net |
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
USA Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Proved properties |
| $ | 42,162 |
|
| $ | (34,573 | ) |
| $ | 7,589 |
|
| $ | 41,382 |
|
| $ | (34,280 | ) |
| $ | 7,102 |
|
| $ | 46,816 |
|
| $ | (35,319 | ) |
| $ | 11,497 |
|
| $ | 41,382 |
|
| $ | (34,280 | ) |
| $ | 7,102 |
|
Unproved properties |
|
| 973 |
|
|
| - |
|
|
| 973 |
|
|
| 1,127 |
|
|
| - |
|
|
| 1,127 |
|
|
| 1,530 |
|
|
| - |
|
|
| 1,530 |
|
|
| 1,127 |
|
|
| - |
|
|
| 1,127 |
|
Other |
|
| 57 |
|
|
| - |
|
|
| 57 |
|
|
| 30 |
|
|
| - |
|
|
| 30 |
|
|
| 76 |
|
|
| - |
|
|
| 76 |
|
|
| 30 |
|
|
| - |
|
|
| 30 |
|
|
|
| 43,192 |
|
|
| (34,573 | ) |
|
| 8,619 |
|
|
| 42,539 |
|
|
| (34,280 | ) |
|
| 8,259 |
|
|
| 48,422 |
|
|
| (35,319 | ) |
|
| 13,103 |
|
|
| 42,539 |
|
|
| (34,280 | ) |
|
| 8,259 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Canadian Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Proved properties |
|
| 15,840 |
|
|
| (14,765 | ) |
|
| 1,075 |
|
|
| 15,672 |
|
|
| (14,687 | ) |
|
| 985 |
|
|
| 16,134 |
|
|
| (14,927 | ) |
|
| 1,207 |
|
|
| 15,672 |
|
|
| (14,687 | ) |
|
| 985 |
|
Unproved properties |
|
| 43 |
|
|
| - |
|
|
| 43 |
|
|
| 45 |
|
|
| - |
|
|
| 45 |
|
|
| 39 |
|
|
| - |
|
|
| 39 |
|
|
| 45 |
|
|
| - |
|
|
| 45 |
|
Other |
|
| 13 |
|
|
| - |
|
|
| 13 |
|
|
| 14 |
|
|
| - |
|
|
| 14 |
|
|
| 10 |
|
|
| - |
|
|
| 10 |
|
|
| 14 |
|
|
| - |
|
|
| 14 |
|
|
|
| 15,896 |
|
|
| (14,765 | ) |
|
| 1,131 |
|
|
| 15,731 |
|
|
| (14,687 | ) |
|
| 1,044 |
|
|
| 16,183 |
|
|
| (14,927 | ) |
|
| 1,256 |
|
|
| 15,731 |
|
|
| (14,687 | ) |
|
| 1,044 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Market Optimization |
|
| 7 |
|
|
| (7 | ) |
|
| - |
|
|
| 7 |
|
|
| (7 | ) |
|
| - |
|
|
| 7 |
|
|
| (7 | ) |
|
| - |
|
|
| 7 |
|
|
| (7 | ) |
|
| - |
|
Corporate & Other |
|
| 833 |
|
|
| (672 | ) |
|
| 161 |
|
|
| 831 |
|
|
| (666 | ) |
|
| 165 |
|
|
| 838 |
|
|
| (682 | ) |
|
| 156 |
|
|
| 831 |
|
|
| (666 | ) |
|
| 165 |
|
|
| $ | 59,928 |
|
| $ | (50,017 | ) |
| $ | 9,911 |
|
| $ | 59,108 |
|
| $ | (49,640 | ) |
| $ | 9,468 |
|
| $ | 65,450 |
|
| $ | (50,935 | ) |
| $ | 14,515 |
|
| $ | 59,108 |
|
| $ | (49,640 | ) |
| $ | 9,468 |
|
USA and Canadian Operations’ property, plant and equipment include internal costs directly related to exploration, development and construction activities of $53118 million, which have been capitalized during the threenine months ended March 31,September 30, 2023 (2022 - $49135 million).
| Leases |
The following table outlines Ovintiv’s estimated future sublease income as at March 31,September 30, 2023. All subleases are classified as operating leases.
(undiscounted) |
| 2023 |
|
| 2024 |
|
| 2025 |
|
| 2026 |
|
| 2027 |
|
| Thereafter |
|
| Total |
|
| 2023 |
|
| 2024 |
|
| 2025 |
|
| 2026 |
|
| 2027 |
|
| Thereafter |
|
| Total |
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Sublease Income |
| $ | 37 |
|
| $ | 51 |
|
| $ | 51 |
|
| $ | 51 |
|
| $ | 47 |
|
| $ | 415 |
|
| $ | 652 |
|
| $ | 13 |
|
| $ | 51 |
|
| $ | 51 |
|
| $ | 51 |
|
| $ | 46 |
|
| $ | 411 |
|
| $ | 623 |
|
For the three and nine months ended March 31,September 30, 2023, operating lease income was $1213 million and $37 million, respectively (2022 - $1312 million)million and $37 million, respectively), and variable lease income was $5 million and $16 million, respectively (2022 - $5 million)million and $15 million, respectively).
1620
| Long-Term Debt |
|
|
|
| As at |
|
| As at |
|
|
|
| As at |
|
| As at |
| ||||
|
|
|
| March 31, |
|
| December 31, |
|
|
|
| September 30, |
|
| December 31, |
| ||||
|
|
|
| 2023 |
|
| 2022 |
|
|
|
| 2023 |
|
| 2022 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
U.S. Dollar Denominated Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Revolving credit and term loan borrowings |
|
|
| $ | 580 |
|
| $ | 393 |
|
|
|
| $ | 709 |
|
| $ | 393 |
|
U.S. Unsecured Notes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
5.65% due May 15, 2025 |
|
|
|
| 600 |
|
|
| - |
| ||||||||||
5.375% due January 1, 2026 |
|
|
|
| 459 |
|
|
| 459 |
|
|
|
|
| 459 |
|
|
| 459 |
|
5.65% due May 15, 2028 |
|
|
|
| 700 |
|
|
| - |
| ||||||||||
8.125% due September 15, 2030 |
|
|
|
| 300 |
|
|
| 300 |
|
|
|
|
| 300 |
|
|
| 300 |
|
7.20% due November 1, 2031 |
|
|
|
| 350 |
|
|
| 350 |
|
|
|
|
| 350 |
|
|
| 350 |
|
7.375% due November 1, 2031 |
|
|
|
| 500 |
|
|
| 500 |
|
|
|
|
| 500 |
|
|
| 500 |
|
6.25% due July 15, 2033 |
|
|
|
| 600 |
|
|
| - |
| ||||||||||
6.50% due August 15, 2034 |
|
|
|
| 599 |
|
|
| 599 |
|
|
|
|
| 599 |
|
|
| 599 |
|
6.625% due August 15, 2037 |
|
|
|
| 390 |
|
|
| 390 |
|
|
|
|
| 390 |
|
|
| 390 |
|
6.50% due February 1, 2038 |
|
|
|
| 430 |
|
|
| 430 |
|
|
|
|
| 430 |
|
|
| 430 |
|
5.15% due November 15, 2041 |
|
|
|
| 148 |
|
|
| 148 |
|
|
|
|
| 148 |
|
|
| 148 |
|
7.10% due July 15, 2053 |
|
|
|
| 400 |
|
|
| - |
| ||||||||||
Total Principal |
|
|
|
| 3,756 |
|
|
| 3,569 |
|
|
|
|
| 6,185 |
|
|
| 3,569 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Increase in Value of Debt Acquired |
|
|
|
| 26 |
|
|
| 27 |
|
|
|
|
| 23 |
|
|
| 27 |
|
Unamortized Debt Discounts and Issuance Costs |
|
|
|
| (26 | ) |
|
| (26 | ) |
|
|
|
| (45 | ) |
|
| (26 | ) |
Total Long-Term Debt |
|
|
| $ | 3,756 |
|
| $ | 3,570 |
|
|
|
| $ | 6,163 |
|
| $ | 3,570 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Current Portion |
|
|
| $ | 580 |
|
| $ | 393 |
|
|
|
| $ | 709 |
|
| $ | 393 |
|
Long-Term Portion |
|
|
|
| 3,176 |
|
|
| 3,177 |
|
|
|
|
| 5,454 |
|
|
| 3,177 |
|
|
|
|
| $ | 3,756 |
|
| $ | 3,570 |
|
|
|
| $ | 6,163 |
|
| $ | 3,570 |
|
On May 31, 2023, Ovintiv completed a public offering of senior unsecured notes of $600 million with a coupon rate of 5.65 percent due May 15, 2025, $700 million with a coupon rate of 5.65 percent due May 15, 2028, $600 million with a coupon rate of 6.25 percent due July 15, 2033, and $400 million with a coupon rate of 7.10 percent due July 15, 2053. The net proceeds of the offering, totaling $2,278 million, were used to fund a portion of the Company’s Permian Acquisition. See Note 8 for further information on the business combination.
During the three and nine months ended September 30, 2022, the Company repurchased, in the open market, approximately $504 million and $565 million, respectively, in principal amount of its senior notes. The aggregate cash payments related to the note repurchases were $525 million and $587 million, respectively, plus accrued interest, and premiums of approximately $22 million, respectively, were recognized in interest expense in the Condensed Consolidated Statement of Earnings.
On June 10, 2022, Ovintiv redeemed the Company’s $1,000 million, 5.625 percent senior notes due July 1, 2024, using cash on hand and proceeds from short-term borrowings. Ovintiv paid approximately $1,072 million in cash including accrued and unpaid interest of $25 million and a make-whole payment of $47 million, which was included in interest expense as discussed in Note 4.
As at March 31,September 30, 2023, the Company had outstanding commercial paper of $280359 million maturing at various dates with a weighted average interest rate of approximately 5.666.25 percent. As at March 31,September 30, 2023, the Company also had $300350 million drawn on its revolving credit facilities.
As at March 31,September 30, 2023, total long-term debt had a carrying value of $3,7566,163 million and a fair value of $3,8376,097 million (as at December 31, 2022 - carrying value of $3,570 million and a fair value of $3,648 million). The estimated fair value of long-term borrowings is categorized within Level 2 of the fair value hierarchy and has been determined based on market information of long-term debt with similar terms and maturity, or by discounting future payments of interest and principal at interest rates expected to be available to the Company at period end.
During the three months ended March 31, 2022, the Company repurchased, in the open market, approximately $6 million in principal amount of its senior notes, plus accrued interest.
21
| Other Liabilities and Provisions |
|
| As at |
|
| As at |
|
| As at |
|
| As at |
| ||||
|
| March 31, |
|
| December 31, |
|
| September 30, |
|
| December 31, |
| ||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Finance Lease Obligations |
| $ | 25 |
|
| $ | 27 |
|
| $ | 22 |
|
| $ | 27 |
|
Unrecognized Tax Benefits |
|
| 5 |
|
|
| - |
| ||||||||
Pensions and Other Post-Employment Benefits |
|
| 73 |
|
|
| 73 |
|
|
| 77 |
|
|
| 73 |
|
Long-Term Incentive Costs (See Note 15) |
|
| 1 |
|
|
| 14 |
| ||||||||
Other Derivative Contracts (See Notes 17, 18) |
|
| 5 |
|
|
| 5 |
| ||||||||
Long-Term Incentive Costs (See Note 16) |
|
| - |
|
|
| 14 |
| ||||||||
Other Derivative Contracts (See Notes 18, 19) |
|
| - |
|
|
| 5 |
| ||||||||
Other |
|
| 12 |
|
|
| 12 |
|
|
| 20 |
|
|
| 12 |
|
|
| $ | 116 |
|
| $ | 131 |
|
| $ | 124 |
|
| $ | 131 |
|
17
| Share Capital |
Authorized
Ovintiv is authorized to issue 750 million shares of common stock, par value $0.01 per share, and 25 million shares of preferred stock, par value $0.01 per share. No shares of preferred stock are outstanding.
Issued and Outstanding
|
| As at |
|
| As at |
|
| As at |
|
| As at |
| ||||||||||||||||||||
|
| March 31, 2023 |
|
| December 31, 2022 |
|
| September 30, 2023 |
|
| December 31, 2022 |
| ||||||||||||||||||||
|
| Number |
|
|
|
|
| Number |
|
|
|
|
| Number |
|
|
|
|
| Number |
|
|
|
| ||||||||
|
| (millions) |
|
| Amount |
|
| (millions) |
|
| Amount |
|
| (millions) |
|
| Amount |
|
| (millions) |
|
| Amount |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Shares of Common Stock Outstanding, Beginning of Year |
|
| 245.7 |
|
| $ | 3 |
|
|
| 258.0 |
|
| $ | 3 |
|
|
| 245.7 |
|
| $ | 3 |
|
|
| 258.0 |
|
| $ | 3 |
|
Shares of Common Stock Purchased |
|
| (5.2 | ) |
|
| - |
|
|
| (14.7 | ) |
|
| - |
|
|
| (8.7 | ) |
|
| - |
|
|
| (14.7 | ) |
|
| - |
|
Shares of Common Stock Issued |
|
| 4.0 |
|
|
| - |
|
|
| 2.4 |
|
|
| - |
|
|
| 35.9 |
|
|
| - |
|
|
| 2.4 |
|
|
| - |
|
Shares of Common Stock Outstanding, End of Period |
|
| 244.5 |
|
| $ | 3 |
|
|
| 245.7 |
|
| $ | 3 |
|
|
| 272.9 |
|
| $ | 3 |
|
|
| 245.7 |
|
| $ | 3 |
|
On June 12, 2023, in accordance with the terms of the Permian Acquisition agreement, Ovintiv issued approximately 31.8 million shares of common stock as a component of the consideration paid to EnCap as discussed in Note 8. In conjunction with the share issuance, the Company recognized share capital of $318 thousand and paid in surplus of $1,169 million.
Ovintiv’s Performance Share Units (“PSU”) and Restricted Share Units (“RSU”) stock-based compensation plans allow the Company to settle the awards either in cash or in the Company’s common stock. Accordingly, Ovintiv issued 4.04.1 million shares of common stock during the threenine months ended March 31,September 30, 2023 (2.4 million shares of common stock during the twelve months ended December 31, 2022), as certain PSU and RSU grants vested during the period.
Normal Course Issuer Bid and Other Share Buybacks
On September 28, 2022,26, 2023, the Company announced it had received regulatory approval for the renewal of its NCIB program, thatwhich enables the Company to purchase, for cancellation or return to treasury, up to approximately 24.826.7 million shares of common stock over a 12-month period from October 3, 20222023, to October 2, 2023.2024.
During the threenine months ended March 31,September 30, 2023, under its 2022 NCIB program which extended from October 3, 2022, to October 2, 2023, the Company purchased approximately 5.27.7 million shares for total consideration of approximately $239328 million. Of the amount paid, $5277 thousand was charged to share capital and $239328 million was charged to paid in surplus.
In addition to the NCIB purchases, during the three and nine months ended September 30, 2023, the Company purchased one million shares of common stock for total consideration of approximately $45 million. Of the amount paid, $10 thousand was charged to share capital and $45 million was charged to paid in surplus.
22
During the three months ended March 31,September 30, 2022, the Company purchased approximately 1.76.7 million shares under its previous2021 NCIB program which extended from October 1, 2021, to September 30, 2022. Total consideration of approximately $71325 million was paid to complete the share repurchases, of which $1477 thousand was charged to share capital and $71325 million was charged to paid in surplus.
During the nine months ended September 30, 2022, the Company purchased approximately 11.2 million shares under its 2021 NCIB program for total consideration of approximately $531 million, of which $112 thousand was charged to share capital and $531 million was charged to paid in surplus.
For the twelve months ended December 31, 2022, the Company purchased approximately 14.7 million shares under a combination of its current2021 and previous2022 NCIB programs for total consideration of approximately $719 million. Of the amount paid, $147 thousand was charged to share capital and $719 million was charged to paid in surplus.
All NCIB purchases were made in accordance with thetheir respective NCIB programs at prevailing market prices plus brokerage fees, with consideration allocated to share capital up to the par value of the shares, with any excess allocated to paid in surplus.
Dividends
During the three months ended March 31,September 30, 2023, the Company declared and paid dividends of $0.30 per share of common stock totaling $82 million (2022 - $0.25 per share of common stock totaling $6162 million (2022 -million).
During the nine months ended September 30, 2023, the Company declared and paid dividends of $0.200.85 per share of common stock totaling $52225 million (2022 - $0.70 per share of common stock totaling $178 million).
On April 2,November 7, 2023, the Board of Directors declared a dividend of $0.30 per share of common stock payable on June 30,December 29, 2023, to shareholders of record as of JuneDecember 15, 2023.
18
Earnings Per Share of Common Stock
The following table presents the calculation of net earnings (loss) per share of common stock:
|
| Three Months Ended |
| |||||
|
| March 31, |
| |||||
(US$ millions, except per share amounts) |
| 2023 |
|
| 2022 |
| ||
|
|
|
|
|
|
| ||
Net Earnings (Loss) |
| $ | 487 |
|
| $ | (241 | ) |
|
|
|
|
|
|
| ||
Number of Shares of Common Stock: |
|
|
|
|
|
| ||
Weighted average shares of common stock outstanding - Basic |
|
| 244.3 |
|
|
| 257.4 |
|
Effect of dilutive securities (1) |
|
| 3.4 |
|
|
| - |
|
Weighted Average Shares of Common Stock Outstanding - Diluted |
|
| 247.7 |
|
|
| 257.4 |
|
|
|
|
|
|
|
| ||
Net Earnings (Loss) per Share of Common Stock |
|
|
|
|
|
| ||
Basic |
| $ | 1.99 |
|
| $ | (0.94 | ) |
Diluted (1) |
|
| 1.97 |
|
|
| (0.94 | ) |
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
(US$ millions, except per share amounts) |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net Earnings (Loss) |
| $ | 406 |
|
| $ | 1,186 |
|
| $ | 1,229 |
|
| $ | 2,302 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Number of Shares of Common Stock: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Weighted average shares of common stock outstanding - Basic |
|
| 273.7 |
|
|
| 252.5 |
|
|
| 255.8 |
|
|
| 255.7 |
|
Effect of dilutive securities |
|
| 2.6 |
|
|
| 3.7 |
|
|
| 3.9 |
|
|
| 4.7 |
|
Weighted Average Shares of Common Stock Outstanding - Diluted |
|
| 276.3 |
|
|
| 256.2 |
|
|
| 259.7 |
|
|
| 260.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net Earnings (Loss) per Share of Common Stock |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic |
| $ | 1.48 |
|
| $ | 4.70 |
|
| $ | 4.80 |
|
| $ | 9.00 |
|
Diluted |
|
| 1.47 |
|
|
| 4.63 |
|
|
| 4.73 |
|
|
| 8.84 |
|
Stock-Based Compensation Plans
Shares issued as a result of awards granted from stock-based compensation plans are generally funded out of the common stock authorized for issuance as approved by the Company’s shareholders.
Certain PSUs and RSUs are classified as equity-settled if the Company has sufficient common stock held in reserve for issuance. These awards are included in the calculation of fully diluted net earnings (loss) per share of common stock, using the treasury stock method, if dilutive.
Ovintiv’s stock options with associated Tandem Stock Appreciation Rights (“TSARs”) give the employee the right to purchase shares of common stock of the Company or receive cash. Historically, most holders of options have elected to exercise their TSARs in exchange for a cash payment. As a result, outstanding options are not considered potentially dilutive securities.
|
|
|
| Three Months Ended |
| |||||
|
| March 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
|
|
|
|
|
|
| ||
Foreign Currency Translation Adjustment |
|
|
|
|
|
| ||
Balance, Beginning of Year |
| $ | 937 |
|
| $ | 1,044 |
|
Change in Foreign Currency Translation Adjustment |
|
| 2 |
|
|
| 28 |
|
Balance, End of Period |
| $ | 939 |
|
| $ | 1,072 |
|
|
|
|
|
|
|
| ||
Pension and Other Post-Employment Benefit Plans |
|
|
|
|
|
| ||
Balance, Beginning of Year |
| $ | 54 |
|
| $ | 48 |
|
|
|
|
|
|
|
| ||
Amounts Reclassified from Other Comprehensive Income: |
|
|
|
|
|
| ||
Reclassification of net actuarial (gains) and losses to net earnings (See Note 16) |
|
| (2 | ) |
|
| (1 | ) |
Income taxes |
|
| - |
|
|
| - |
|
Balance, End of Period |
| $ | 52 |
|
| $ | 47 |
|
Total Accumulated Other Comprehensive Income |
| $ | 991 |
|
| $ | 1,119 |
|
1923
14. | Accumulated Other Comprehensive Income |
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Foreign Currency Translation Adjustment |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Balance, Beginning of Period |
| $ | 992 |
|
| $ | 1,013 |
|
| $ | 937 |
|
| $ | 1,044 |
|
Change in Foreign Currency Translation Adjustment |
|
| (59 | ) |
|
| (94 | ) |
|
| (4 | ) |
|
| (125 | ) |
Balance, End of Period |
| $ | 933 |
|
| $ | 919 |
|
| $ | 933 |
|
| $ | 919 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Pension and Other Post-Employment Benefit Plans |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Balance, Beginning of Period |
| $ | 51 |
|
| $ | 45 |
|
| $ | 54 |
|
| $ | 48 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Amounts Reclassified from Other Comprehensive Income: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Reclassification of net actuarial (gains) and losses to net earnings (See Note 17) |
|
| (2 | ) |
|
| (1 | ) |
|
| (6 | ) |
|
| (5 | ) |
Income taxes |
|
| - |
|
|
| - |
|
|
| 1 |
|
|
| 1 |
|
Balance, End of Period |
| $ | 49 |
|
| $ | 44 |
|
| $ | 49 |
|
| $ | 44 |
|
Total Accumulated Other Comprehensive Income |
| $ | 982 |
|
| $ | 963 |
|
| $ | 982 |
|
| $ | 963 |
|
15. | Variable Interest Entities |
Veresen Midstream Limited Partnership
Veresen Midstream Limited Partnership (“VMLP”) provides gathering, compression and processing services under various agreements related to the Company’s development of liquids and natural gas production in the Montney play. As at March 31,September 30, 2023, VMLP provides approximately 1,156 MMcf/d of natural gas gathering and compression and 918 MMcf/d of natural gas processing under long-term service agreements with remaining terms ranging from eight to 22 years and have various renewal terms providing up to a potential maximum of 10 years.
Ovintiv has determined that VMLP is a variable interest entity and that Ovintiv holds variable interests in VMLP. Ovintiv is not the primary beneficiary as the Company does not have the power to direct the activities that most significantly impact VMLP’s economic performance. These key activities relate to the construction, operation, maintenance and marketing of the assets owned by VMLP. The variable interests arise from certain terms under the various long-term service agreements and include: i) a take or pay for volumes in certain agreements; ii) an operating fee of which a portion can be converted into a fixed fee once VMLP assumes operatorship of certain assets; and iii) a potential payout of minimum costs in certain agreements. The potential payout of minimum costs will be assessed in the eighth year of the assets’ service period and is based on whether there is an overall shortfall of total system cash flows from natural gas gathered and compressed under certain agreements. The potential payout amount can be reduced in the event VMLP markets unutilized capacity to third-party users. Ovintiv is not required to provide any financial support or guarantees to VMLP.
As a result of Ovintiv’s involvement with VMLP, the maximum total exposure to loss related to the commitments under the agreements is estimated to be $1,3941,280 million as at March 31,September 30, 2023. The estimate comprises the take or pay volume commitments and the potential payout of minimum costs. The take or pay volume commitments associated with certain gathering and processing assets are included in Note 2021 under Transportation and Processing. The potential payout requirement is highly uncertain as the amount is contingent on future production estimates, pace of development and downstream transportation constraints. As at March 31,September 30, 2023, accounts payable and accrued liabilities included $0.10.4 million related to the take or pay commitment.
2024
| Compensation Plans |
Ovintiv has a number of compensation arrangements under which the Company awards various types of long-term incentive grants to eligible employees and Directors. They may include Stock Appreciation Rights (“SARs”), TSARs, PSUs, Deferred Share Units (“DSUs”) and RSUs.
Ovintiv accounts for certain PSUs and RSUs as equity-settled stock-based payment transactions provided there is sufficient common stock held in reserve for issuance. SARs, TSARs and DSUs are accounted for as cash-settled stock-based payment transactions. The Company accrues compensation costs over the vesting period based on the fair value of the rights determined using the Black-Scholes-Merton or other appropriate fair value models.
During the first quarter of 2023, Ovintiv'sOvintiv’s Board of Directors resolved to settle certain PSU awards and RSU awards with the issuance of the Company'sCompany’s common stock. Accordingly, these awards were modified and reclassified as equity-settled share-based payment transactions at the modification date. The modification date fair value of the awards was US$43.80 per share and C$59.47 per share for the U.S. dollar denominated and Canadian dollar denominated awards, respectively, and there was no incremental compensation cost recognized at the modification date.
The following weighted average assumptions were used to determine the fair value of SAR and TSAR units outstanding:
|
| As at March 31, 2023 |
|
| As at March 31, 2022 |
|
| As at September 30, 2023 |
|
| As at September 30, 2022 |
| ||||||||
|
| US$ SAR |
| C$ TSAR |
|
| US$ SAR |
| C$ TSAR |
|
| US$ SAR |
| C$ TSAR |
|
| US$ SAR |
| C$ TSAR |
|
|
| Share Units |
| Share Units |
|
| Share Units |
| Share Units |
|
| Share Units |
| Share Units |
|
| Share Units |
| Share Units |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Risk Free Interest Rate |
| 3.79% |
| 3.79% |
|
| 2.21% |
| 2.21% |
|
| 4.87% |
| 4.87% |
|
| 3.72% |
| 3.72% |
|
Dividend Yield |
| 2.77% |
| 2.78% |
|
| 1.48% |
| 1.50% |
|
| 2.52% |
| 2.50% |
|
| 2.17% |
| 2.02% |
|
Expected Volatility Rate (1) |
| 64.06% |
| 60.86% |
|
| 106.57% |
| 105.29% |
|
| 54.82% |
| 51.21% |
|
| 107.63% |
| 105.92% |
|
Expected Term |
| 1.5 yrs |
| 1.4 yrs |
|
| 1.6 yrs |
| 1.7 yrs |
|
| 1.2 yrs |
| 1.1 yrs |
|
| 1.6 yrs |
| 1.6 yrs |
|
Market Share Price |
| US$36.08 |
| C$48.72 |
|
| US$54.07 |
| C$67.63 |
|
| US$47.57 |
| C$64.59 |
|
| US$46.00 |
| C$63.58 |
|
Weighted Average Grant Date Fair Value |
| US$45.01 |
| C$62.36 |
|
| US$37.98 |
| C$53.93 |
|
| US$44.89 |
| C$62.45 |
|
| US$41.97 |
| C$57.31 |
|
The Company has recognized the following share-based compensation costs:
|
| Three Months Ended |
|
| Three Months Ended |
|
| Nine Months Ended |
| |||||||||||||||
|
| March 31, |
|
| September 30, |
|
| September 30, |
| |||||||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total Compensation Costs of Transactions Classified as Cash-Settled |
| $ | (28 | ) |
| $ | 89 |
|
| $ | 3 |
|
| $ | 28 |
|
| $ | (21 | ) |
| $ | 118 |
|
Total Compensation Costs of Transactions Classified as Equity-Settled |
|
| 21 |
|
|
| 10 |
|
|
| 22 |
|
|
| 26 |
|
|
| 67 |
|
|
| 57 |
|
Less: Total Share-Based Compensation Costs Capitalized |
|
| (8 | ) |
|
| (9 | ) |
|
| (7 | ) |
|
| (8 | ) |
|
| (20 | ) |
|
| (24 | ) |
Total Share-Based Compensation Expense (Recovery) |
| $ | (15 | ) |
| $ | 90 |
|
| $ | 18 |
|
| $ | 46 |
|
| $ | 26 |
|
| $ | 151 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Recognized in the Condensed Consolidated Statement of Earnings in: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Operating |
| $ | 4 |
|
| $ | 11 |
|
| $ | 6 |
|
| $ | 9 |
|
| $ | 17 |
|
| $ | 28 |
|
Administrative |
|
| (19 | ) |
|
| 79 |
|
|
| 12 |
|
|
| 37 |
|
|
| 9 |
|
|
| 123 |
|
|
| $ | (15 | ) |
| $ | 90 |
|
| $ | 18 |
|
| $ | 46 |
|
| $ | 26 |
|
| $ | 151 |
|
As at March 31,September 30, 2023, the liability for cash-settled share-based payment transactions totaled $2617 million ($153 million as at December 31, 2022), of which $2517 million ($139 million as at December 31, 2022) is recognized in accounts payable and accrued liabilities and $1nil million ($14 million as at December 31, 2022) is recognized in other liabilities and provisions in the Condensed Consolidated Balance Sheet.
The following units were granted primarily in conjunction with the Company’s annual grant of long-term incentive awards. The PSUs and RSUs were granted at the volume-weighted average trading price of shares of Ovintiv common stock for the five days prior to the grant date.
|
|
|
| |
|
|
|
| |
PSUs |
|
|
|
|
RSUs |
|
|
|
|
DSUs |
|
|
|
|
2125
| Pension and Other Post-Employment Benefits |
The Company has recognized total benefit plans expense which includes pension benefits and other post-employment benefits (“OPEB”) for the threenine months ended March 31September 30 as follows:
|
| Pension Benefits |
|
| OPEB |
|
| Total |
|
| Pension Benefits |
|
| OPEB |
|
| Total |
| ||||||||||||||||||||||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Net Defined Periodic Benefit Cost |
| $ | 1 |
|
| $ | - |
|
| $ | (1 | ) |
| $ | (1 | ) |
| $ | - |
|
| $ | (1 | ) |
| $ | 1 |
|
| $ | - |
|
| $ | (2 | ) |
| $ | (2 | ) |
| $ | (1 | ) |
| $ | (2 | ) |
Defined Contribution Plan Expense |
|
| 6 |
|
|
| 6 |
|
|
| - |
|
|
| - |
|
|
| 6 |
|
|
| 6 |
|
|
| 18 |
|
|
| 17 |
|
|
| - |
|
|
| - |
|
|
| 18 |
|
|
| 17 |
|
Total Benefit Plans Expense |
| $ | 7 |
|
| $ | 6 |
|
| $ | (1 | ) |
| $ | (1 | ) |
| $ | 6 |
|
| $ | 5 |
|
| $ | 19 |
|
| $ | 17 |
|
| $ | (2 | ) |
| $ | (2 | ) |
| $ | 17 |
|
| $ | 15 |
|
Of the total benefit plans expense, $616 million (2022 - $515 million) was included in operating expense and $14 million (2022 - $14 million) was included in administrative expense. Excluding service costs, net defined periodic benefit gains of $13 million (2022 - gains of $14 million) were recorded in other (gains) losses, net.
The net defined periodic benefit cost for the threenine months ended March 31September 30 is as follows:
|
| Defined Benefits |
|
| OPEB |
|
| Total |
|
| Defined Benefits |
|
| OPEB |
|
| Total |
| ||||||||||||||||||||||||||||||
|
| 2023 |
| 2022 |
|
| 2023 |
| 2022 |
|
| 2023 |
| 2022 |
|
| 2023 |
| 2022 |
|
| 2023 |
| 2022 |
|
| 2023 |
| 2022 |
| ||||||||||||||||||
|
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|
|
|
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|
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|
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|
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| ||||||||||||
Service Cost |
| $ | - |
|
| $ | - |
|
| $ | 1 |
|
| $ | - |
|
| $ | 1 |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | 2 |
|
| $ | 2 |
|
| $ | 2 |
|
| $ | 2 |
|
Interest Cost |
|
| 2 |
|
|
| 1 |
|
|
| - |
|
|
| - |
|
|
| 2 |
|
|
| 1 |
|
|
| 5 |
|
|
| 4 |
|
|
| 2 |
|
|
| 1 |
|
|
| 7 |
|
|
| 5 |
|
Expected Return on Plan Assets |
|
| (1 | ) |
|
| (1 | ) |
|
| - |
|
|
| - |
|
|
| (1 | ) |
|
| (1 | ) |
|
| (4 | ) |
|
| (4 | ) |
|
| - |
|
|
| - |
|
|
| (4 | ) |
|
| (4 | ) |
Amounts Reclassified from Accumulated Other |
|
|
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| ||||||||||||
Amortization of net actuarial (gains) and losses |
|
| - |
|
|
| - |
|
|
| (2 | ) |
|
| (1 | ) |
|
| (2 | ) |
|
| (1 | ) |
|
| - |
|
|
| - |
|
|
| (6 | ) |
|
| (5 | ) |
|
| (6 | ) |
|
| (5 | ) |
Total Net Defined Periodic Benefit Cost (1) |
| $ | 1 |
|
| $ | - |
|
| $ | (1 | ) |
| $ | (1 | ) |
| $ | - |
|
| $ | (1 | ) |
| $ | 1 |
|
| $ | - |
|
| $ | (2 | ) |
| $ | (2 | ) |
| $ | (1 | ) |
| $ | (2 | ) |
2226
| Fair Value Measurements |
The fair values of cash and cash equivalents, accounts receivable and accrued revenues, and accounts payable and accrued liabilities approximate their carrying amounts due to the short-term maturity of those instruments. The fair values of restricted cash and marketable securities included in other assets approximate their carrying amounts due to the nature of the instruments held.
Recurring fair value measurements are performed for risk management assets and liabilities and other derivative contracts, as discussed further in Note 18.19. These items are carried at fair value in the Condensed Consolidated Balance Sheet and are classified within the three levels of the fair value hierarchy in the following tables.
Fair value changes and settlements for amounts related to risk management assets and liabilities are recognized in revenues and foreign exchange gains and losses according to their purpose.
As at March 31, 2023 |
| Level 1 |
|
| Level 2 |
| Level 3 |
|
| Total Fair |
|
| Netting (1) |
|
| Carrying |
| |||||||||||||||||||||||||||||||
As at September 30, 2023 |
| Level 1 |
|
| Level 2 |
| Level 3 |
|
| Total Fair |
|
| Netting (1) |
|
| Carrying |
| |||||||||||||||||||||||||||||||
|
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| ||||||||||||
Risk Management Assets |
|
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|
|
|
|
|
|
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| ||||||||||||
Commodity Derivatives: |
|
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|
|
|
|
|
|
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|
|
|
|
|
|
|
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|
|
|
|
|
|
| ||||||||||||
Current assets |
| $ | 1 |
|
| $ | 94 |
|
| $ | 22 |
|
| $ | 117 |
|
| $ | (28 | ) |
| $ | 89 |
|
| $ | - |
|
| $ | 74 |
|
| $ | - |
|
| $ | 74 |
|
| $ | (24 | ) |
| $ | 50 |
|
Long-term assets |
|
| - |
|
|
| 3 |
|
|
| - |
|
|
| 3 |
|
|
| - |
|
|
| 3 |
|
|
| - |
|
|
| 18 |
|
|
| - |
|
|
| 18 |
|
|
| (4 | ) |
|
| 14 |
|
Foreign Currency Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
| ||||||||||||
Current assets |
|
| - |
|
|
| 3 |
|
|
| - |
|
|
| 3 |
|
|
| (3 | ) |
|
| - |
|
|
| - |
|
|
| 2 |
|
|
| - |
|
|
| 2 |
|
|
| (2 | ) |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Risk Management Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Commodity Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Current liabilities |
| $ | - |
|
| $ | 67 |
|
| $ | 2 |
|
| $ | 69 |
|
| $ | (28 | ) |
| $ | 41 |
|
| $ | - |
|
| $ | 98 |
|
| $ | 107 |
|
| $ | 205 |
|
| $ | (24 | ) |
| $ | 181 |
|
Long-term liabilities |
|
| - |
|
|
| 22 |
|
|
| - |
|
|
| 22 |
|
|
| - |
|
|
| 22 |
|
|
| - |
|
|
| 7 |
|
|
| 1 |
|
|
| 8 |
|
|
| (4 | ) |
|
| 4 |
|
Foreign Currency Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Current liabilities |
|
| - |
|
|
| 7 |
|
|
| - |
|
|
| 7 |
|
|
| (3 | ) |
|
| 4 |
|
|
| - |
|
|
| 3 |
|
|
| - |
|
|
| 3 |
|
|
| (2 | ) |
|
| 1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Other Derivative Contracts (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Long-term in other liabilities and provisions |
| $ | - |
|
| $ | 5 |
|
| $ | - |
|
| $ | 5 |
|
| $ | - |
|
| $ | 5 |
| ||||||||||||||||||||||||
Current in accounts payable and accrued liabilities |
| $ | - |
|
| $ | 4 |
|
| $ | - |
|
| $ | 4 |
|
| $ | - |
|
| $ | 4 |
| ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
As at December 31, 2022 |
| Level 1 |
|
| Level 2 |
| Level 3 |
|
| Total Fair |
|
| Netting (1) |
|
| Carrying |
|
| Level 1 |
|
| Level 2 |
| Level 3 |
|
| Total Fair |
|
| Netting (1) |
|
| Carrying |
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Risk Management Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Commodity Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Current assets |
| $ | - |
|
| $ | 93 |
|
| $ | 12 |
|
| $ | 105 |
|
| $ | (53 | ) |
| $ | 52 |
|
| $ | - |
|
| $ | 93 |
|
| $ | 12 |
|
| $ | 105 |
|
| $ | (53 | ) |
| $ | 52 |
|
Long-term assets |
|
| - |
|
|
| 34 |
|
|
| - |
|
|
| 34 |
|
|
| - |
|
|
| 34 |
|
|
| - |
|
|
| 34 |
|
|
| - |
|
|
| 34 |
|
|
| - |
|
|
| 34 |
|
Foreign Currency Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Current assets |
|
| - |
|
|
| 1 |
|
|
| - |
|
|
| 1 |
|
|
| - |
|
|
| 1 |
|
|
| - |
|
|
| 1 |
|
|
| - |
|
|
| 1 |
|
|
| - |
|
|
| 1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
| ||||||||||||
Risk Management Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Commodity Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Current liabilities |
| $ | - |
|
| $ | 128 |
|
| $ | - |
|
| $ | 128 |
|
| $ | (53 | ) |
| $ | 75 |
|
| $ | - |
|
| $ | 128 |
|
| $ | - |
|
| $ | 128 |
|
| $ | (53 | ) |
| $ | 75 |
|
Foreign Currency Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Current liabilities |
|
| - |
|
|
| 11 |
|
|
| - |
|
|
| 11 |
|
|
| - |
|
|
| 11 |
|
|
| - |
|
|
| 11 |
|
|
| - |
|
|
| 11 |
|
|
| - |
|
|
| 11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Other Derivative Contracts (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Long-term in other liabilities and provisions |
| $ | - |
|
| $ | 5 |
|
| $ | - |
|
| $ | 5 |
|
| $ | - |
|
| $ | 5 |
|
| $ | - |
|
| $ | 5 |
|
| $ | - |
|
| $ | 5 |
|
| $ | - |
|
| $ | 5 |
|
2327
The Company’s Level 1 and Level 2 risk management assets and liabilities consist of commodity fixed price contracts, NYMEX three-way options, NYMEX costless collars, foreign currency swaps and basis swaps with terms to 2025. The fair values of these contracts are estimated using inputs which are either directly or indirectly observable from active markets, such as exchange and other published prices, broker quotes and observable trading activity throughout the term of the instruments.
Level 3 Fair Value Measurements
As at March 31,September 30, 2023, the Company’s Level 3 risk management assets and liabilities consist of WTI three-way options and WTI costless collars with terms to 2024. The WTI three-way options are a combination of a sold call, a bought put and a sold put. The WTI costless collars are a combination of a sold call and a bought put. These contracts allow the Company to participate in the upside of commodity prices to the ceiling of the call option and provide the Company with complete (collars) or partial (three-way) downside price protection through the put options. The fair values of these contracts are determined using an option pricing model using observable and unobservable inputs such as implied volatility. The unobservable inputs are obtained from third parties whenever possible and reviewed by the Company for reasonableness.
A summary of changes in Level 3 fair value measurements for risk management positions is presented below:
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| March 31, |
|
| September 30, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Balance, Beginning of Year |
| $ | 12 |
|
| $ | (172 | ) |
| $ | 12 |
|
| $ | (172 | ) |
Total Gains (Losses) |
|
| 8 |
|
|
| (553 | ) |
|
| (122 | ) |
|
| (435 | ) |
Purchases, Sales, Issuances and Settlements: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Purchases, sales and issuances |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Settlements |
|
| - |
|
|
| 163 |
|
|
| 2 |
|
|
| 564 |
|
Transfers Out of Level 3 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Balance, End of Period |
| $ | 20 |
|
| $ | (562 | ) |
| $ | (108 | ) |
| $ | (43 | ) |
Change in Unrealized Gains (Losses) During the |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Period Included in Net Earnings (Loss) |
| $ | 8 |
|
| $ | (390 | ) |
| $ | (120 | ) |
| $ | 129 |
|
Quantitative information about unobservable inputs used in Level 3 fair value measurements is presented below as at March 31,September 30, 2023:
|
| Valuation Technique |
| Unobservable Input |
| Range |
| Weighted Average (1) |
|
|
|
|
|
|
|
|
|
|
|
Risk Management - WTI Options |
| Option Model |
| Implied Volatility |
|
|
|
|
|
A 10 percent increase or decrease in implied volatility for the WTI options would cause an approximate corresponding $17 million ($2 million as at December 31, 2022) increase or decrease to net risk management assets and liabilities.
2428
| Financial Instruments and Risk Management |
A) Financial Instruments
Ovintiv’s financial assets and liabilities are recognized in cash and cash equivalents, accounts receivable and accrued revenues, other assets, accounts payable and accrued liabilities, risk management assets and liabilities, long-term debt, and other liabilities and provisions.
B) Risk Management Activities
Ovintiv uses derivative financial instruments to manage its exposure to fluctuating commodity prices and foreign currency exchange rates. The Company does not apply hedge accounting to any of its derivative financial instruments. As a result, gains and losses from changes in the fair value are recognized in net earnings (loss).
Commodity Price Risk
Commodity price risk arises from the effect that fluctuations in future commodity prices may have on revenues from production. To partially mitigate exposure to commodity price risk, the Company has entered into various derivative financial instruments. The use of these derivative instruments is governed under formal policies and is subject to limits established by the Board of Directors.
Oil and NGLs - To partially mitigate oil and NGL commodity price risk, the Company uses WTI- and NGL-based contracts such as fixed price contracts, options and costless collars. Ovintiv has also entered into basis swaps to manage against widening price differentials between various production areas, products and price points.
Natural Gas - To partially mitigate natural gas commodity price risk, the Company uses NYMEX-based contracts such as fixed price contracts, options and costless collars. Ovintiv has also entered into basis swaps to manage against widening price differentials between various production areas and benchmark price points.
Foreign Exchange Risk
Foreign exchange risk arises from changes in foreign currency exchange rates that may affect the fair value or future cash flows from the Company’s financial assets or liabilities. To partially mitigate the effect of foreign exchange fluctuations on future commodity revenues and expenses, the Company may enter into foreign currency derivative contracts. As at March 31,September 30, 2023, the Company has entered into $401133 million notional U.S. dollar denominated currency swaps at an average exchange rate of C$1.33561.3470 to US$1, which mature monthly through the remainder of 2023.2023, and $200 million notional U.S. dollar denominated currency swaps at an average exchange rate of C$1.3501 to US$1, which mature monthly throughout the first half of 2024.
2529
Risk Management Positions as at March 31,September 30, 2023
|
| Notional Volumes |
| Term |
| Average Price |
| Fair Value |
|
| Notional Volumes |
| Term |
| Average Price |
| Fair Value |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Oil and NGL Contracts |
|
|
|
|
| US$/bbl |
|
|
|
|
|
|
|
| US$/bbl |
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Fixed Price Contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
WTI Fixed Price |
| 35.0 Mbbls/d |
| 2023 |
| 76.94 |
| $ | (36 | ) | ||||||||||
WTI Fixed Price |
| 12.4 Mbbls/d |
| 2024 |
| 73.69 |
|
| (38 | ) | ||||||||||
Ethane Fixed Price |
| 5.0 Mbbls/d |
| 2024 |
| 10.28 |
| $ | - |
|
| 5.0 Mbbls/d |
| 2024 |
| 10.28 |
|
| (1 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
WTI Three-Way Options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Sold call / bought put / sold put |
| 40.0 Mbbls/d |
| 2023 |
| 112.05 / 65.42 / 50.00 |
|
| 22 |
|
| 40.0 Mbbls/d |
| 2023 |
| 104.19 / 65.00 / 50.00 |
|
| (1 | ) |
Sold call / bought put / sold put |
| 12.6 Mbbls/d |
| 2024 |
| 89.76 / 65.00 / 50.00 |
|
| (9 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
WTI Costless Collars |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Sold call / bought put |
| 35.0 Mbbls/d |
| 2023 |
| 87.60 / 65.00 |
|
| (11 | ) | ||||||||||
Sold call / bought put |
| 2.5 Mbbls/d |
| 2024 |
| 80.09 / 60.00 |
|
| (2 | ) |
| 39.8 Mbbls/d |
| 2024 |
| 82.02 / 64.37 |
|
| (87 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Basis Contracts (1) |
|
|
| 2023 |
|
|
|
| 1 |
|
|
|
| 2023 |
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Other Financial Positions |
|
|
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| (1 | ) |
Oil and NGLs Fair Value Position |
|
|
|
|
|
|
|
| 21 |
|
|
|
|
|
|
|
|
| (184 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Natural Gas Contracts |
|
|
|
|
| US$/Mcf |
|
|
|
|
|
|
|
| US$/Mcf |
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Fixed Price Contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
NYMEX Fixed Price |
| 100 MMcf/d |
| 2024 |
| 3.72 |
|
| 3 |
|
| 200 MMcf/d |
| 2024 |
| 3.62 |
|
| 16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
NYMEX Three-Way Options |
|
|
|
|
|
|
|
|
|
| ||||||||||
Sold call / bought put / sold put |
| 400 MMcf/d |
| 2023 |
| 10.05 / 4.00 / 3.00 |
|
| 31 |
| ||||||||||
Sold call / bought put / sold put |
| 397 MMcf/d |
| 2023 |
| 7.55 / 3.61 / 2.59 |
|
| 74 |
|
| 150 MMcf/d |
| 2024 |
| 4.56 / 3.00 / 2.25 |
|
| 3 |
|
|
|
|
|
|
|
|
|
| ||||||||||||
NYMEX Costless Collars |
|
|
|
|
|
|
|
|
|
| ||||||||||
Sold call / bought put |
| 134 MMcf/d |
| 2023 |
| 3.68 / 3.00 |
|
| 8 |
|
| 200 MMcf/d |
| 2023 |
| 3.68 / 3.00 |
|
| 2 |
|
Sold call / bought put |
| 12 MMcf/d |
| 2024 |
| 5.50 / 3.00 |
|
| - |
|
| 400 MMcf/d |
| 2024 |
| 4.37 / 3.00 |
|
| 6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Basis Contracts (2) |
|
|
| 2023 |
|
|
|
| (53 | ) |
|
|
| 2023 |
|
|
|
| (17 | ) |
|
|
|
| 2024 |
|
|
|
| (10 | ) |
|
|
| 2024 |
|
|
|
| 11 |
|
|
|
|
| 2025 |
|
|
|
| (16 | ) |
|
|
| 2025 |
|
|
|
| 10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Other Financial Positions |
|
|
|
|
|
|
|
| 2 |
|
|
|
|
|
|
|
|
| 1 |
|
Natural Gas Fair Value Position |
|
|
|
|
|
|
|
| 8 |
|
|
|
|
|
|
|
|
| 63 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Other Derivative Contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Fair Value Position (3) |
|
|
|
|
|
|
|
| (5 | ) |
|
|
|
|
|
|
|
| (4 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Foreign Currency Contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Fair Value Position (4) |
|
|
| 2023 |
|
|
|
| (4 | ) |
|
|
| 2023 - 2024 |
|
|
|
| (1 | ) |
Total Fair Value Position |
|
|
|
|
|
|
| $ | 20 |
|
|
|
|
|
|
|
| $ | (126 | ) |
2630
Earnings Impact of Realized and Unrealized Gains (Losses) on Risk Management Positions
|
| Three Months Ended |
|
| Three Months Ended |
|
| Nine Months Ended |
| |||||||||||||||
|
| March 31, |
|
| September 30, |
|
| September 30, |
| |||||||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Realized Gains (Losses) on Risk Management |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Commodity and Other Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Revenues (1) |
| $ | (76 | ) |
| $ | (446 | ) |
| $ | 10 |
|
| $ | (821 | ) |
| $ | (61 | ) |
| $ | (2,075 | ) |
Foreign Currency Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Foreign exchange |
|
| (4 | ) |
|
| 1 |
|
|
| - |
|
|
| (1 | ) |
|
| (7 | ) |
|
| 1 |
|
Interest Rate Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Interest Rate (2) |
|
| - |
|
|
| - |
|
|
| 1 |
|
|
| - |
| ||||||||
|
| $ | (80 | ) |
| $ | (445 | ) |
| $ | 10 |
|
| $ | (822 | ) |
| $ | (67 | ) |
| $ | (2,074 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Unrealized Gains (Losses) on Risk Management |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Commodity and Other Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Revenues (2) |
| $ | 18 |
|
| $ | (1,012 | ) | ||||||||||||||||
Revenues (3) |
| $ | (292 | ) |
| $ | 710 |
|
| $ | (132 | ) |
| $ | 211 |
| ||||||||
Foreign Currency Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Foreign exchange |
|
| 6 |
|
|
| 3 |
|
|
| (6 | ) |
|
| (21 | ) |
|
| 9 |
|
|
| (25 | ) |
|
| $ | 24 |
|
| $ | (1,009 | ) |
| $ | (298 | ) |
| $ | 689 |
|
| $ | (123 | ) |
| $ | 186 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total Realized and Unrealized Gains (Losses) on Risk Management, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Commodity and Other Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Revenues (1) (2) |
| $ | (58 | ) |
| $ | (1,458 | ) | ||||||||||||||||
Revenues (1) (3) |
| $ | (282 | ) |
| $ | (111 | ) |
| $ | (193 | ) |
| $ | (1,864 | ) | ||||||||
Foreign Currency Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Foreign exchange |
|
| 2 |
|
|
| 4 |
|
|
| (6 | ) |
|
| (22 | ) |
|
| 2 |
|
|
| (24 | ) |
Interest Rate Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Interest Rate (2) |
|
| - |
|
|
| - |
|
|
| 1 |
|
|
| - |
| ||||||||
|
| $ | (56 | ) |
| $ | (1,454 | ) |
| $ | (288 | ) |
| $ | (133 | ) |
| $ | (190 | ) |
| $ | (1,888 | ) |
Reconciliation of Unrealized Risk Management Positions from January 1 to March 31September 30
|
|
|
| 2023 |
|
| 2022 |
|
|
|
| 2023 |
|
| 2022 |
| ||||||||||||
|
|
|
| Fair Value |
|
| Total |
|
| Total |
|
|
|
| Fair Value |
|
| Total |
|
| Total |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Fair Value of Contracts, Beginning of Year |
|
|
| $ | (4 | ) |
|
|
|
|
|
|
|
|
| $ | (4 | ) |
|
|
|
|
|
| ||||
Change in Fair Value of Contracts in Place at Beginning of Year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
and Contracts Entered into During the Period |
|
|
|
| (56 | ) |
| $ | (56 | ) |
| $ | (1,454 | ) |
|
|
|
| (190 | ) |
| $ | (190 | ) |
| $ | (1,888 | ) |
Settlement of Other Derivative Contracts |
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
| 1 |
|
|
|
|
|
|
| ||||
Fair Value of Contracts Realized During the Period |
|
|
|
| 80 |
|
|
| 80 |
|
|
| 445 |
|
|
|
|
| 67 |
|
|
| 67 |
|
|
| 2,074 |
|
Fair Value of Contracts, End of Period |
|
|
| $ | 20 |
|
| $ | 24 |
|
| $ | (1,009 | ) |
|
|
| $ | (126 | ) |
| $ | (123 | ) |
| $ | 186 |
|
Risk management assets and liabilities arise from the use of derivative financial instruments and are measured at fair value. See Note 1718 for a discussion of fair value measurements.
2731
Unrealized Risk Management Positions
|
| As at |
|
| As at |
|
| As at |
|
| As at |
| ||||
|
| March 31, |
|
| December 31, |
|
| September 30, |
|
| December 31, |
| ||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Risk Management Assets |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Current |
| $ | 89 |
|
| $ | 53 |
|
| $ | 50 |
|
| $ | 53 |
|
Long-term |
|
| 3 |
|
|
| 34 |
|
|
| 14 |
|
|
| 34 |
|
|
|
| 92 |
|
|
| 87 |
|
|
| 64 |
|
|
| 87 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Risk Management Liabilities |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Current |
|
| 45 |
|
|
| 86 |
|
|
| 182 |
|
|
| 86 |
|
Long-term |
|
| 22 |
|
|
| - |
|
|
| 4 |
|
|
| - |
|
|
|
| 67 |
|
|
| 86 |
|
|
| 186 |
|
|
| 86 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Other Derivative Contract Liabilities |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Current in accounts payable and accrued liabilities |
|
| 4 |
|
|
| - |
| ||||||||
Long-term in other liabilities and provisions |
|
| 5 |
|
|
| 5 |
|
|
| - |
|
|
| 5 |
|
|
|
| 5 |
|
|
| 5 |
|
|
| 4 |
|
|
| 5 |
|
Net Risk Management Assets (Liabilities) and Other Derivative Contracts |
| $ | 20 |
|
| $ | (4 | ) |
| $ | (126 | ) |
| $ | (4 | ) |
C) Credit Risk
Credit risk arises from the potential that the Company may incur a loss if a counterparty to a financial instrument fails to meet its obligation in accordance with agreed terms. While exchange-traded contracts are subject to nominal credit risk due to the financial safeguards established by the exchanges and clearing agencies, over-the-counter traded contracts expose Ovintiv to counterparty credit risk. Counterparties to the Company’s derivative financial instruments consist primarily of major financial institutions and companies within the energy industry. This credit risk exposure is mitigated through the use of credit policies approved by the Board of Directors governing the Company’s credit portfolio including credit practices that limit transactions according to counterparties’ credit quality. Mitigation strategies may include master netting arrangements, requesting collateral, purchasing credit insurance and/or transacting credit derivatives. The Company executes commodity derivative financial instruments under master agreements that have netting provisions that provide for offsetting payables against receivables. Ovintiv actively evaluates the creditworthiness of its counterparties, assigns appropriate credit limits and monitors credit exposures against those assigned limits. As at March 31,September 30, 2023, Ovintiv’s maximum exposure of loss due to credit risk from derivative financial instrument assets on a gross and net fair value basis was $12394 million and $9264 million, respectively, as disclosed in Note 17.18. The Company had no significant credit derivatives in place and held no collateral at March 31,September 30, 2023.
Any cash equivalents include high-grade, short-term securities, placed primarily with financial institutions with strong investment grade ratings. Any foreign currency agreements entered into are with major financial institutions that have investment grade credit ratings.
A substantial portion of the Company’s accounts receivable are with customers and working interest owners in the oil and gas industry and are subject to normal industry credit risks. As at March 31,September 30, 2023, approximately 8578 percent (88 percent as at December 31, 2022) of Ovintiv’s accounts receivable and financial derivative credit exposures were with investment grade counterparties.
During 2015 and 2017, the Company entered into agreements resulting from divestitures, which may require Ovintiv to fulfill certain payment obligations on the take or pay volume commitments assumed by the purchasers. The circumstances that would require Ovintiv to perform under the agreements include events where a purchaser fails to make payment to the guaranteed party and/or a purchaser is subject to an insolvency event. The agreements expire in June 2024 with a fair value recognized of $54 million as at March 31,September 30, 2023 ($5 million as at December 31, 2022). The maximum potential amount of undiscounted future payments is $2917 million as at March 31,September 30, 2023, and is considered unlikely.
2832
| Supplementary Information |
Supplemental disclosures to the Condensed Consolidated Statement of Cash Flows are presented below:
|
| Three Months Ended |
|
| Three Months Ended |
|
| Nine Months Ended |
| |||||||||||||||
|
| March 31, |
|
| September 30, |
|
| September 30, |
| |||||||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Accounts receivable and accrued revenues |
| $ | 314 |
|
| $ | (501 | ) |
| $ | (251 | ) |
| $ | 326 |
|
| $ | 268 |
|
| $ | (337 | ) |
Accounts payable and accrued liabilities |
|
| (187 | ) |
|
| 153 |
|
|
| 2 |
|
|
| (289 | ) |
|
| (288 | ) |
|
| 106 |
|
Current portion of operating lease liabilities |
|
| 12 |
|
|
| - |
|
|
| (5 | ) |
|
| (4 | ) |
|
| 4 |
|
|
| 7 |
|
Income tax receivable and payable |
|
| 83 |
|
|
| 2 |
|
|
| 62 |
|
|
| (2 | ) |
|
| 190 |
|
|
| 42 |
|
|
| $ | 222 |
|
| $ | (346 | ) |
| $ | (192 | ) |
| $ | 31 |
|
| $ | 174 |
|
| $ | (182 | ) |
|
| Three Months Ended |
|
| Three Months Ended |
|
| Nine Months Ended |
| |||||||||||||||
|
| March 31, |
|
| September 30, |
|
| September 30, |
| |||||||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Non-Cash Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
ROU operating lease assets and liabilities |
| $ | (29 | ) |
| $ | (24 | ) |
| $ | (4 | ) |
| $ | (2 | ) |
| $ | (73 | ) |
| $ | (54 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Non-Cash Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Property, plant and equipment accruals |
| $ | (1 | ) |
| $ | 41 |
|
| $ | 93 |
|
| $ | 32 |
|
| $ | 185 |
|
| $ | 78 |
|
Capitalized long-term incentives |
|
| (2 | ) |
|
| 5 |
|
|
| - |
|
|
| 2 |
|
|
| (2 | ) |
|
| 5 |
|
Property additions/dispositions, including swaps |
|
| 18 |
|
|
| 4 |
|
|
| 3 |
|
|
| 7 |
|
|
| 25 |
|
|
| 43 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Non-Cash Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Common shares issued in conjunction with the Permian |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Acquisition (See Note 8) |
| $ | - |
|
| $ | - |
|
| $ | (1,169 | ) |
| $ | - |
|
| Commitments and Contingencies |
Commitments
The following table outlines the Company’s commitments as at March 31,September 30, 2023:
|
| Expected Future Payments |
|
| Expected Future Payments |
| ||||||||||||||||||||||||||||||||||||||||||||||||||
(undiscounted) |
| 2023 |
|
| 2024 |
|
| 2025 |
|
| 2026 |
|
| 2027 |
|
| Thereafter |
|
| Total |
|
| 2023 |
|
| 2024 |
|
| 2025 |
|
| 2026 |
|
| 2027 |
|
| Thereafter |
|
| Total |
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Transportation and Processing |
| $ | 595 |
|
| $ | 696 |
|
| $ | 581 |
|
| $ | 503 |
|
| $ | 476 |
|
| $ | 2,261 |
|
| $ | 5,112 |
|
| $ | 199 |
|
| $ | 716 |
|
| $ | 601 |
|
| $ | 509 |
|
| $ | 480 |
|
| $ | 2,311 |
|
| $ | 4,816 |
|
Drilling and Field Services |
|
| 244 |
|
|
| 21 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 265 |
|
|
| 133 |
|
|
| 132 |
|
|
| 80 |
|
|
| 2 |
|
|
| - |
|
|
| - |
|
|
| 347 |
|
Building Leases |
|
| 7 |
|
|
| 8 |
|
|
| 8 |
|
|
| 2 |
|
|
| - |
|
|
| - |
|
|
| 25 |
| ||||||||||||||||||||||||||||
Building Leases & Other Commitments |
|
| 3 |
|
|
| 6 |
|
|
| 10 |
|
|
| 6 |
|
|
| 5 |
|
|
| 22 |
|
|
| 52 |
| ||||||||||||||||||||||||||||
Total |
| $ | 846 |
|
| $ | 725 |
|
| $ | 589 |
|
| $ | 505 |
|
| $ | 476 |
|
| $ | 2,261 |
|
| $ | 5,402 |
|
| $ | 335 |
|
| $ | 854 |
|
| $ | 691 |
|
| $ | 517 |
|
| $ | 485 |
|
| $ | 2,333 |
|
| $ | 5,215 |
|
Operating leases with terms greater than one year are not included in the commitments table above. The table above includes short-term leases with contract terms less than 12 months, such as drilling rigs and field office leases, as well as non-lease operating cost components associated with building leases.
Included within transportation and processing in the table above are certain commitments associated with midstream service agreements with VMLP as described in Note 14.15. Divestiture transactions can reduce certain commitments disclosed above.
Contingencies
Ovintiv is involved in various legal claims and actions arising in the normal course of the Company’s operations. Although the outcome of these claims cannot be predicted with certainty, the Company does not expect these matters to have a material
33
adverse effect on Ovintiv’s financial position, cash flows or results of operations. Management’s assessment of these matters may change in the future as certain of these matters are in early stages or are subject to a number of uncertainties. For material matters that the Company believes an unfavorable outcome is reasonably possible, the Company discloses the nature and a
29
range of potential exposures. If an unfavorable outcome were to occur, there exists the possibility of a material impact on the Company’s consolidated net earnings or loss for the period in which the effect becomes reasonably estimable. The Company accrues for such items when a liability is both probable and the amount can be reasonably estimated. Such accruals are based on the Company’s information known about the matters, estimates of the outcomes of such matters and experience in handling similar matters.
|
|
Acquisition of Core Midland Basin Assets (“Permian Acquisition”)
On April 3, 2023, the Company announced it had entered into a definitive purchase agreement to acquire substantially all leasehold interest and related assets of Black Swan Oil & Gas, LLC, PetroLegacy II Holdings, LLC, Piedra Energy III Holdings, LLC and Piedra Energy IV Holdings, LLC (collectively, the "Sellers"), which are portfolio companies of funds managed by EnCap Investments L.P. ("EnCap"), in a cash and stock transaction valued at approximately $4.275 billion before closing adjustments. Under the terms of the agreement, the Company expects to issue approximately 32.6 million shares of Ovintiv common stock and pay approximately $3.125 billion in cash to complete the transaction. The transaction has been unanimously approved by the Board of Directors and is subject to the terms and conditions set forth in the purchase agreement as well as other customary closing conditions and regulatory approvals. The transaction is expected to close in the second quarter of 2023 and has an effective date of January 1, 2023.
Divestiture of Bakken
In conjunction with the Permian Acquisition noted above, on April 3, 2023, the Company also announced an agreement to sell the entirety of its Bakken assets located in North Dakota, to Grayson Mill Bakken, LLC, which is a portfolio company of funds managed by EnCap, for approximately $825 million before closing adjustments. The transaction is expected to close in the second quarter of 2023 and is subject to ordinary closing conditions, regulatory approvals and other adjustments. The transaction has an effective date of January 1, 2023.
3034
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The MD&A is intended to provide a narrative description of the Company’s business from management’s perspective, which includes an overview of Ovintiv’s condensed consolidated results for the three and nine months ended March 31,September 30, 2023 and period-over-period comparison. This MD&A should be read in conjunction with the unaudited interim Condensed Consolidated Financial Statements and accompanying notes for the period ended March 31,September 30, 2023 (“Consolidated Financial Statements”), which are included in Part I, Item 1 of this Quarterly Report on Form 10-Q and the audited Consolidated Financial Statements and accompanying notes and MD&A for the year ended December 31, 2022, which are included in Items 8 and 7, respectively, of the 2022 Annual Report on Form 10‑K.
Common industry terms and abbreviations are used throughout this MD&A and are defined in the Definitions, Conversions and Conventions sections of this Quarterly Report on Form 10-Q. This MD&A includes the following sections:
Executive Overview |
Strategy
Ovintiv is a leading North American energy producer that is focused on developing its multi-basin portfolio of oil, NGLs and natural gas producing plays. Ovintiv is committed to growing long-term shareholder value by safely delivering on its strategic priorities through execution excellence, disciplined capital allocation, commercial acumen and risk management, while driving environmental, social and governance progress. The Company’s strategy is founded on its multi-basin portfolio of top tiertop-tier assets, financial strength, as well as its core and foundational values.
In support of the Company’s commitment to unlocking shareholder value, Ovintiv utilizes its capital allocation framework to increase returns to shareholders while focusing on strategic opportunities to strengthen the balance sheet.
Ovintiv is delivering results in a socially and environmentally responsible manner. Thoughtfully developed best practices are deployed across its assets, allowing the Company to capitalize on operational efficiencies and decrease emissions intensity. The Company’s sustainability reporting which outlines its key metrics, targets and progress achieved relating to ESG practices, can be found in the Company Outlook section of this MD&A and on the Company’s sustainability website.
Ovintiv continually reviews and evaluates its strategy and changing market conditions to maximize cash flow generation from its high-quality assets and renew its premium well inventory in some of the best plays in North America. These assets form a multi-basin portfolio of oil, NGLs and natural gas producing plays enabling flexible and efficient investment of capital that support the Company’s strategy.
Underpinning Ovintiv’s strategy are core values of one, agile, innovative and driven, which guide the organization to be collaborative, responsive, flexible and determined. The Company is committed to excellence with a passion to drive corporate financial performance and shareholder value.
For additional information on Ovintiv’s strategy, its reporting segments and the plays in which the Company operates, refer to Items 1 and 2 of the 2022 Annual Report on Form 10-K.
In evaluating its operations and assessing its leverage, Ovintiv reviews performance-based measures such as Non‑GAAP Cash Flow and debt-based metrics such as Debt to Adjusted Capitalization, Debt to EBITDA and Debt to Adjusted EBITDA, which are non-GAAP measures and do not have any standardized meaning under U.S. GAAP. These measures may not be similar to measures presented by other issuers and should not be viewed as a substitute for measures reported under U.S. GAAP. Additional information regarding these measures, including reconciliations to the closest GAAP measure, can be found in the Non-GAAP Measures section of this MD&A.
3135
Highlights
During the first quarternine months of 2023, the Company focused on executing its 2023 capital investment plan aimed at maximizing profitability through operational and capital efficiencies, minimizing the impact of inflation and delivering cash from operating activities. In conjunction with closing the Permian Acquisition as discussed below, the Company was also focused on integrating the additional Permian assets into its existing operations. Lower upstream product revenues in the first quarternine months of 2023 compared to 2022, primarily resulted from lower average realized prices, excluding the impact of risk management activities. Decreases in average realized liquids and natural gas and liquids prices of 2653 percent and six26 percent, respectively, were primarily due to lower benchmark prices. Ovintiv continues to focus on optimizing realized prices from the diversification of the Company’s downstream markets.
Significant Developments and Subsequent Events
Financial Results
Three months ended March 31,September 30, 2023
36
Nine months ended September 30, 2023
Capital Investment
During the nine months ended September 30, 2023
32
Production
ThreeDuring the nine months ended March 31,September 30, 2023
Operating Expenses
During the nine months ended September 30, 2023
The Company’s upstream operations refers to the summation of the USA and Canadian operating segments. Additional information on the items above and other expenses can be found in the Results of Operations section of this MD&A. 37 2023 Outlook Industry Outlook Oil Markets The oil and gas industry is cyclical and commodity prices are inherently volatile. Oil prices reflect global supply and demand dynamics as well as the geopolitical and macroeconomic environment. Oil prices for the remainder of 2023 will be impacted by the interplay between recessionary concerns and the resulting direction of global demand for oil, continued OPEC+ production restraint and continued supply uncertainties resulting from Natural Gas Markets Natural gas prices are primarily impacted by structural changes in supply and demand as well as deviations from seasonally normal weather. Natural gas prices for the remainder of 2023 will be impacted by the interplay between natural gas production and associated natural gas from oil production, changes in demand from the power generation sector, changes in export levels of U.S. liquefied natural gas, impacts from seasonal weather, as well as supply chain constraints or other disruptions resulting from geopolitical events. Company Outlook The Company will continue to exercise discretion and discipline to optimize capital allocation Markets for oil and natural gas are exposed to different price risks and are inherently volatile. To mitigate price volatility and provide more certainty around cash flows, the Company enters into derivative financial instruments. Additional information on Ovintiv’s hedging program can be found in Note Capital Investment The Company Ovintiv continually strives to improve well performance and lower costs through innovative techniques. Ovintiv’s 38 Production During the Operating Expenses The Company is on track to maintain Long-Term Debt During the As at September 30, 2023, the Company had $359 million of commercial paper outstanding under its U.S. commercial paper (“U.S. CP”) programs and $350 million outstanding under its revolving credit facilities. Additional information on Ovintiv’s Additional information on Ovintiv’s fourth quarter and updated full year 2023 Corporate Guidance can be accessed on the Company’s website at www.ovintiv.com. 39 Environmental, Social and Governance Ovintiv recognizes climate change as a global concern and the importance of reducing its environmental footprint as part of the solution. The Company voluntarily participates in emission reduction programs and has adopted a range of strategies to help reduce emissions from its operations. These strategies include incorporating new and proven technologies and optimizing processes in its operations and working closely with third-party providers to develop best practices. The Company continues to look for innovative techniques and efficiencies to help maintain its commitment to emission reductions. In May 2023, Ovintiv Ovintiv’s constant pursuit of efficiencies and continuous improvements allowed the Company to eliminate routine flaring in its operations. The Company is in In The Company continues to find innovate approaches to reduce its emissions profile and add value to its business. In October 2023, the Company entered into a partnership agreement with a midstream company which will connect Ovintiv’s natural gas-powered facilities in Montney to British Columbia’s hydro and wind generated electrical grid. This arrangement will reduce the Company’s GHG emissions while adding processing capacity. Ovintiv is committed to diversity, equity and inclusion Ovintiv remains committed to protecting the health and safety of its workforce. Safety is a foundational value at Ovintiv and plays a critical role in the Company’s belief that a safe workplace is a strong indicator of a well-managed business. This safety-oriented mindset enables the Company to quickly respond to emergencies and minimize any impacts to employees and business continuity. Safety performance goals are incorporated into the Additional information on Ovintiv’s ESG practices are included in its most recent Sustainability Report on the Company’s sustainability website at https://sustainability.ovintiv.com. Results of Operations Selected Financial Information Three months ended March 31, Three months ended September 30, Nine months ended September 30, ($ millions) 2023 2022 2023 2022 2023 2022 Product and Service Revenues Upstream product revenues $ 1,875 $ 2,324 $ 2,049 $ 2,653 $ 5,570 $ 7,864 Market optimization 716 1,082 863 988 2,282 3,197 Service revenues (1) 1 1 1 2 5 3 Total Product and Service Revenues 2,592 3,407 2,913 3,643 7,857 11,064 Gains (Losses) on Risk Management, Net (58 ) (1,458 ) (282 ) (111 ) (193 ) (1,864 ) Sublease Revenues 17 18 18 17 53 52 Total Revenues 2,551 1,967 2,649 3,549 7,717 9,252 Total Operating Expenses (2) 1,873 2,167 2,182 2,176 6,041 6,563 Operating Income (Loss) 678 (200 ) 467 1,373 1,676 2,689 Total Other (Income) Expenses 65 46 74 99 233 239 Net Earnings (Loss) Before Income Tax 613 (246 ) 393 1,274 1,443 2,450 Income Tax Expense (Recovery) 126 (5 ) (13 ) 88 214 148 Net Earnings (Loss) $ 487 $ (241 ) $ 406 $ 1,186 $ 1,229 $ 2,302 Revenues Ovintiv’s revenues are substantially derived from sales of oil, NGLs and natural gas production. Increases or decreases in Ovintiv’s revenue, profitability and future production are highly dependent on the commodity prices the Company receives. Prices are market driven and fluctuate due to factors beyond the Company’s control, such as supply and demand, seasonality and geopolitical and economic factors. The Company’s realized prices generally reflect WTI, NYMEX, Edmonton Condensate and AECO benchmark prices, as well as other downstream benchmarks, including Houston and Dawn. The Company proactively mitigates price risk and optimizes margins by entering into firm transportation contracts to diversify market access to different sales points. Realized prices, excluding the impact of risk management activities, may differ from the benchmarks for many reasons, including quality, location, or production being sold at different market hubs. Benchmark prices relevant to the Company are shown in the table below. Benchmark Prices Three months ended March 31, Three months ended September 30, Nine months ended September 30, (average for the period) 2023 2022 2023 2022 2023 2022 Oil & NGLs WTI ($/bbl) $ 76.13 $ 94.29 $ 82.26 $ 91.55 $ 77.39 $ 98.09 Houston ($/bbl) 77.58 95.72 83.81 93.24 78.78 99.59 Edmonton Condensate (C$/bbl) 108.24 122.08 104.74 114.19 103.45 124.90 Natural Gas NYMEX ($/MMBtu) $ 3.42 $ 4.95 $ 2.55 $ 8.20 $ 2.69 $ 6.77 AECO (C$/Mcf) 4.34 4.59 2.39 5.81 3.03 5.56 Dawn (C$/MMBtu) 3.67 5.60 3.04 9.75 3.16 8.19 Production Volumes and Realized Prices Three months ended March 31, Three months ended September 30, Nine months ended September 30, Production Volumes (1) Realized Prices (2) Production Volumes (1) Realized Prices (2) Production Volumes (1) Realized Prices (2) 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 Oil (Mbbls/d, $/bbl) USA Operations 127.2 128.2 $ 74.06 $ 93.16 170.8 133.3 $ 80.69 $ 93.22 147.0 131.4 $ 76.26 $ 98.37 Canadian Operations 0.1 0.1 71.44 82.80 0.1 0.1 100.64 82.86 0.1 0.1 85.74 88.58 Total 127.3 128.3 74.06 93.15 170.9 133.4 80.70 93.21 147.1 131.5 76.26 98.36 NGLs – Plant Condensate (Mbbls/d, $/bbl) USA Operations 10.6 9.2 61.84 85.09 11.2 11.1 59.96 66.62 10.8 10.1 58.98 78.77 Canadian Operations 28.1 35.4 77.22 96.22 32.1 34.9 75.67 86.65 31.1 34.3 74.48 96.59 Total 38.7 44.6 73.01 93.93 43.3 46.0 71.61 81.82 41.9 44.4 70.49 92.53 NGLs – Other (Mbbls/d, $/bbl) USA Operations 73.7 64.8 18.73 33.55 71.8 74.1 16.91 29.82 74.5 70.5 16.29 32.69 Canadian Operations 12.5 14.4 35.17 41.23 14.9 12.8 25.50 41.12 15.4 13.9 25.30 43.49 Total 86.2 79.2 21.11 34.94 86.7 86.9 18.39 31.49 89.9 84.4 17.83 34.46 Total Oil & NGLs (Mbbls/d, $/bbl) USA Operations 211.5 202.2 54.16 73.68 253.8 218.5 61.73 70.37 232.3 212.0 56.21 75.59 Canadian Operations 40.7 49.9 64.32 80.37 47.1 47.8 59.84 74.43 46.6 48.3 58.25 81.32 Total 252.2 252.1 55.80 75.00 300.9 266.3 61.43 71.10 278.9 260.3 56.55 76.65 Natural Gas (MMcf/d, $/Mcf) USA Operations 507 475 3.40 4.82 508 502 2.22 7.55 515 487 2.46 6.45 Canadian Operations 1,048 1,012 4.80 4.56 1,117 998 2.38 6.11 1,126 984 2.99 5.78 Total 1,555 1,487 4.34 4.64 1,625 1,500 2.33 6.60 1,641 1,471 2.82 6.00 Total Production (MBOE/d, $/BOE) USA Operations 296.1 281.3 44.52 61.08 338.5 302.1 49.62 63.44 318.1 293.3 45.02 65.37 Canadian Operations 215.3 218.6 35.50 39.44 233.3 214.2 23.46 45.11 234.2 212.2 25.95 45.30 Total 511.4 499.9 40.72 51.62 571.8 516.3 38.95 55.83 552.3 505.5 36.94 56.94 Production Mix (%) Oil & Plant Condensate 32 34 38 35 34 35 NGLs – Other 17 16 15 17 16 16 Total Oil & NGLs 49 50 53 52 50 51 Natural Gas 51 50 47 48 50 49 Production Change Year Over Year (%) (3) Total Oil & NGLs - (9 ) 13 (3 ) 7 (7 ) Natural Gas 5 (6 ) 8 (4 ) 12 (7 ) Total Production 2 (7 ) 11 (3 ) 9 (7 ) Upstream Product Revenues Three months ended March 31, Three months ended September 30, ($ millions) Oil NGLs - Plant Condensate NGLs - Other Natural Gas Total Oil NGLs - Plant Condensate NGLs - Other Natural Gas Total 2022 Upstream Product Revenues (1) $ 1,075 $ 377 $ 249 $ 621 $ 2,322 $ 1,144 $ 345 $ 251 $ 911 $ 2,651 Increase (decrease) due to: Sales prices (219 ) (70 ) (105 ) (42 ) (436 ) (197 ) (37 ) (108 ) (635 ) (977 ) Production volumes (8 ) (52 ) 20 29 (11 ) 322 (21 ) 2 71 374 2023 Upstream Product Revenues $ 848 $ 255 $ 164 $ 608 $ 1,875 2023 Upstream Product Revenues (1) $ 1,269 $ 287 $ 145 $ 347 $ 2,048 Nine months ended September 30, ($ millions) Oil NGLs - Plant Condensate NGLs - Other Natural Gas Total 2022 Upstream Product Revenues (1) $ 3,531 $ 1,122 $ 793 $ 2,411 $ 7,857 Increase (decrease) due to: Sales prices (888 ) (243 ) (409 ) (1,420 ) (2,960 ) Production volumes 418 (72 ) 54 272 672 2023 Upstream Product Revenues (1) $ 3,061 $ 807 $ 438 $ 1,263 $ 5,569 Oil Revenues Three months ended Oil revenues were higher by $125 million compared to the third quarter of 2022 primarily due to: Nine months ended September 30, 2023 versus September 30, 2022 Oil revenues were lower by 43 NGL Revenues Three months ended September 30, 2023 versus September 30, 2022 NGL revenues were lower by $164 million compared to the third quarter of 2022 primarily due to: Nine months ended September 30, 2023 versus September 30, 2022 NGL revenues were lower by $670 million compared to the first nine months of 2022 primarily due to: Natural Gas Revenues Three months ended Natural gas revenues were lower by Nine months ended September 30, 2023 versus September 30, 2022 Natural gas revenues were lower by $1,148 million compared to the first nine months of 2022 primarily due to: Gains (Losses) on Risk Management, Net As a means of managing commodity price volatility, Ovintiv enters into commodity derivative financial instruments on a portion of its expected oil, NGLs and natural gas production volumes. Additional information on the Company’s commodity price positions as at The following tables provide the effects of the Company’s risk management activities on revenues. Three months ended March 31, Three months ended September 30, Nine months ended September 30, ($ millions) 2023 2022 2023 2022 2023 2022 Realized Gains (Losses) on Risk Management Commodity Price (1) Oil $ - $ (143 ) $ (19 ) $ (141 ) $ (19 ) $ (519 ) NGLs - Plant Condensate - (32 ) - (26 ) - (109 ) Natural Gas (76 ) (273 ) 28 (654 ) (43 ) (1,449 ) Other (2) - 2 1 - 1 2 Total (76 ) (446 ) 10 (821 ) (61 ) (2,075 ) Unrealized Gains (Losses) on Risk Management 18 (1,012 ) (292 ) 710 (132 ) 211 Total Gains (Losses) on Risk Management, Net $ (58 ) $ (1,458 ) $ (282 ) $ (111 ) $ (193 ) $ (1,864 ) Three months ended March 31, Three months ended September 30, Nine months ended September 30, (Per-unit) 2023 2022 2023 2022 2023 2022 Realized Gains (Losses) on Risk Management Commodity Price (1) Oil ($/bbl) $ - $ (12.41 ) $ (1.18 ) $ (11.47 ) $ (0.46 ) $ (14.44 ) NGLs - Plant Condensate ($/bbl) $ - $ (7.99 ) $ - $ (6.09 ) $ - $ (8.96 ) Natural Gas ($/Mcf) $ (0.54 ) $ (2.04 ) $ 0.18 $ (4.75 ) $ (0.09 ) $ (3.61 ) Total ($/BOE) $ (1.64 ) $ (9.97 ) $ 0.17 $ (17.28 ) $ (0.41 ) $ (15.05 ) Ovintiv recognizes fair value changes from its risk management activities each reporting period. The changes in fair value result from new positions and settlements that occur during each period, as well as the relationship between contract prices and the associated forward curves. Realized gains or losses on risk management activities related to commodity price mitigation are included in the USA Operations, Canadian Operations and Market Optimization revenues as the contracts are cash settled. Unrealized gains or losses on fair value changes of unsettled contracts are included in the Corporate and Other segment. Additional information on fair value changes can be found in Note Market Optimization Revenues Market Optimization product revenues relate to activities that provide operational flexibility and cost mitigation for transportation commitments, product type, delivery points and customer diversification. Ovintiv also purchases and sells third-party volumes under marketing arrangements associated with the Company’s previous divestitures. Three months ended March 31, Three months ended September 30, Nine months ended September 30, ($ millions) 2023 2022 2023 2022 2023 2022 Market Optimization $ 716 $ 1,082 $ 863 $ 988 $ 2,282 $ 3,197 45 Three months ended Market Optimization product revenues decreased partially offset by: Market Optimization product revenues decreased $915 million compared to the first nine months of 2022 primarily due to: partially offset by: Sublease Revenues Sublease revenues primarily include amounts related to the sublease of office space in The Bow office building recorded in the Corporate and Other segment. Additional information on office sublease income can be found in Note Operating Expenses Production, Mineral and Other Taxes Production, mineral and other taxes include production and property taxes. Production taxes are generally assessed as a percentage of oil, NGLs and natural gas production revenues. Property taxes are generally assessed based on the value of the underlying assets. $ millions $/BOE Three months ended September 30, Nine months ended September 30, Three months ended March 31, 2023 2022 2023 2022 ($ millions) 2023 2022 2023 2022 USA Operations $ 80 $ 90 $ 3.01 $ 3.56 $ 84 $ 106 $ 237 $ 311 Canadian Operations 4 4 $ 0.19 $ 0.19 5 3 12 10 Total $ 84 $ 94 $ 1.83 $ 2.08 $ 89 $ 109 $ 249 $ 321 Three months ended September 30, Nine months ended September 30, ($/BOE) 2023 2022 2023 2022 USA Operations $ 2.71 $ 3.83 $ 2.73 $ 3.89 Canadian Operations $ 0.24 $ 0.12 $ 0.19 $ 0.15 Production, Mineral and Other Taxes $ 1.70 $ 2.29 $ 1.65 $ 2.32 Three months ended Production, mineral and other taxes decreased partially offset by: 46 Nine months ended September 30, 2023 versus September 30, 2022 Production, mineral and other taxes decreased $72 million compared to the first nine months of 2022 primarily due to: partially offset by: Transportation and Processing Transportation and processing expense includes transportation costs incurred to move product from production points to sales points including gathering, compression, pipeline tariffs, trucking and storage costs. Ovintiv also incurs costs related to processing provided by third parties or through ownership interests in processing facilities. $ millions $/BOE Three months ended September 30, Nine months ended September 30, Three months ended March 31, 2023 2022 2023 2022 ($ millions) 2023 2022 2023 2022 USA Operations $ 147 $ 135 $ 5.51 $ 5.31 $ 124 $ 170 $ 419 $ 464 Canadian Operations 267 231 $ 13.80 $ 11.72 265 257 800 741 Upstream Transportation and Processing 414 366 $ 9.00 $ 8.12 389 427 1,219 1,205 Market Optimization 41 40 44 41 121 122 Total $ 455 $ 406 $ 433 $ 468 $ 1,340 $ 1,327 Three months ended September 30, Nine months ended September 30, ($/BOE) 2023 2022 2023 2022 USA Operations $ 3.98 $ 6.14 $ 4.82 $ 5.80 Canadian Operations $ 12.36 $ 13.01 $ 12.51 $ 12.78 Upstream Transportation and Processing $ 7.40 $ 8.99 $ 8.09 $ 8.73 Three months ended Transportation and processing expense partially offset by: Nine months ended September 30, 2023 versus September 30, 2022 Transportation and processing expense increased $13 million compared to the first nine months of 2022 primarily due to: partially offset by: Operating Operating expense includes costs paid by the Company, net of amounts capitalized, on oil and natural gas properties in which Ovintiv has a working interest. These costs primarily include labor, service contract fees, chemicals, fuel, water hauling, electricity and workovers. $ millions $/BOE Three months ended March 31, 2023 2022 2023 2022 USA Operations $ 170 $ 142 $ 6.39 $ 5.58 Canadian Operations 29 37 $ 1.50 $ 1.90 Upstream Operating Expense (1) 199 179 $ 4.33 $ 3.98 Market Optimization 7 9 Total $ 206 $ 188 Three months ended September 30, Nine months ended September 30, ($ millions) 2023 2022 2023 2022 USA Operations $ 208 $ 187 $ 545 $ 478 Canadian Operations 28 34 59 96 Upstream Operating Expense 236 221 604 574 Market Optimization 7 7 20 22 Total $ 243 $ 228 $ 624 $ 596 Three months ended September 30, Nine months ended September 30, ($/BOE) 2023 2022 2023 2022 USA Operations $ 6.66 $ 6.73 $ 6.27 $ 5.96 Canadian Operations $ 1.30 $ 1.69 $ 0.92 $ 1.65 Upstream Operating Expense $ 4.48 $ 4.64 $ 4.00 $ 4.16 Three months ended Operating expense increased partially offset by: Nine months ended September 30, 2023 versus September 30, 2022 Operating expense increased $28 million compared to the first nine months of 2022 primarily due to: partially offset by: Additional information on the Company’s long-term incentive costs can be found in Note Purchased Product Purchased product expense includes purchases of oil, NGLs and natural gas from third parties that are used to provide operational flexibility and cost mitigation for transportation commitments, product type, delivery points and customer diversification. Ovintiv also purchases and sells third-party volumes under marketing arrangements associated with the Company’s previous divestitures. Three months ended March 31, Three months ended September 30, Nine months ended September 30, ($ millions) 2023 2022 2023 2022 2023 2022 Market Optimization $ 701 $ 1,066 $ 846 $ 973 $ 2,239 $ 3,154 48 Three months ended Purchased product expense decreased partially offset by: Purchased product expense decreased $915 million compared to the first nine months of 2022 primarily due to: partially offset by: Depreciation, Depletion & Amortization Proved properties within each country cost center are depleted using the unit-of-production method based on proved reserves as discussed in Note 1 to the Consolidated Financial Statements included in Item 8 of the 2022 Annual Report on Form 10-K. Depletion rates are impacted by impairments, acquisitions, divestitures and foreign exchange rates, as well as fluctuations in 12-month average trailing prices which affect proved reserves volumes. Corporate assets are carried at cost and depreciated on a straight-line basis over the estimated service lives of the assets. Additional information can be found under Upstream Assets and Reserve Estimates in the Critical Accounting Estimates section of the MD&A included in Item 7 of the 2022 Annual Report on Form 10-K. $ millions $/BOE Three months ended September 30, Nine months ended September 30, Three months ended March 31, 2023 2022 2023 2022 ($ millions) 2023 2022 2023 2022 USA Operations $ 294 $ 200 $ 11.03 $ 7.91 $ 409 $ 225 $ 1,039 $ 642 Canadian Operations 65 59 $ 3.38 $ 2.98 72 61 215 176 Upstream DD&A 359 259 $ 7.81 $ 5.75 481 286 1,254 818 Corporate & Other 5 5 5 5 15 15 Total $ 364 $ 264 $ 486 $ 291 $ 1,269 $ 833 Three months ended September 30, Nine months ended September 30, ($/BOE) 2023 2022 2023 2022 USA Operations $ 13.15 $ 8.11 $ 11.97 $ 8.03 Canadian Operations $ 3.34 $ 3.09 $ 3.36 $ 3.04 Upstream DD&A $ 9.15 $ 6.03 $ 8.32 $ 5.93 Three months ended DD&A increased The depletion rate in the USA Operations increased $5.04 per BOE compared to the third quarter of 2022 primarily due to a higher depletable base associated with the Permian Acquisition. 49 Nine months ended September 30, 2023 versus September 30, 2022 DD&A increased $436 million compared to the first nine months of 2022 primarily due to: partially offset by: The depletion rate in the USA Administrative Administrative expense represents costs associated with corporate functions provided by Ovintiv staff. $ millions $/BOE Three months ended September 30, Nine months ended September 30, Three months ended March 31, 2023 2022 2023 2022 ($ millions) 2023 2022 2023 2022 Administrative, excluding Long-Term Incentive, Restructuring and Legal Costs, and Current Transaction and Legal Costs, and Current Expected Credit Losses (1) $ 71 $ 66 $ 1.52 $ 1.48 $ 66 $ 66 $ 203 $ 194 Long-term incentive costs (19 ) 79 (0.41 ) 1.75 12 37 9 123 Restructuring and legal costs 6 (1 ) 0.14 (0.03 ) Transaction and legal costs 2 - 94 (1 ) Current expected credit losses - - - 2 Total Administrative $ 58 $ 144 $ 1.25 $ 3.20 $ 80 $ 103 $ 306 $ 318 Three months ended September 30, Nine months ended September 30, ($/BOE) 2023 2022 2023 2022 Administrative, excluding Long-Term Incentive, Transaction and Legal Costs, and Current Expected Credit Losses (1) $ 1.27 $ 1.39 $ 1.34 $ 1.40 Long-term incentive costs 0.23 0.77 0.06 0.89 Transaction and legal costs 0.03 - 0.63 (0.01 ) Current expected credit losses - - - 0.02 Total Administrative $ 1.53 $ 2.16 $ 2.03 $ 2.30 Three months ended Administrative expense decreased Nine months ended September 30, 2023 versus September 30, 2022 Administrative expense decreased $12 million compared to the first nine months of 2022 primarily due to: partially offset by: Additional information on the Company’s long-term incentive costs can be found in Note Other (Income) Expenses Three months ended March 31, Three months ended September 30, Nine months ended September 30, ($ millions) 2023 2022 2023 2022 2023 2022 Interest $ 71 $ 74 $ 98 $ 83 $ 249 $ 248 Foreign Exchange (Gain) Loss, Net (3 ) (1 ) (22 ) 19 - 21 Other (Gains) Losses, Net (3 ) (27 ) (2 ) (3 ) (16 ) (30 ) Total Other (Income) Expenses $ 65 $ 46 $ 74 $ 99 $ 233 $ 239 Interest Interest expense primarily includes interest on Ovintiv’s short-term and long-term debt. Additional information on changes in interest can be found in Note 4 to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. Three months ended Interest expense partially offset by: Nine months ended September 30, 2023 versus September 30, 2022 Interest expense increased $1 million compared to the first nine months of 2022 primarily due to: partially offset by: Foreign Exchange (Gain) Loss, Net Foreign exchange gains and losses primarily result from the impact of fluctuations in the Canadian to U.S. dollar exchange rate. Additional information on changes in foreign exchange gains or losses can be found in Note 5 to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. Additional information on foreign exchange rates and the effects of foreign exchange rate changes can be found in Part I, Item 3 of this Quarterly Report on Form 10-Q. Three months ended Net foreign exchange gain partially offset by: 51 Nine months ended September 30, 2023 versus September 30, 2022 Net foreign exchange of nil compared to partially offset by: Other (Gains) Losses, Net Other (gains) losses, net, primarily includes other non-recurring revenues or expenses and may also include items such as interest income, interest received from tax authorities, reclamation charges relating to decommissioned assets, government stimulus programs and adjustments related to other assets. Other gains in the first Income Tax Three months ended March 31, Three months ended September 30, Nine months ended September 30, ($ millions) 2023 2022 2023 2022 2023 2022 Current Income Tax Expense (Recovery) $ 62 $ 3 $ 65 $ - $ 181 $ 10 Deferred Income Tax Expense (Recovery) 64 (8 ) (78 ) 88 33 138 Income Tax Expense (Recovery) $ 126 $ (5 ) $ (13 ) $ 88 $ 214 $ 148 Effective Tax Rate 20.6% 2.0% (3.3%) 6.9% 14.8% 6.0% Income Tax Expense (Recovery) Three months ended In the Nine months ended September 30, 2023 versus September 30, 2022 In the first nine months of 2023, Ovintiv recorded higher income tax expense of $66 million compared to 2022 primarily due to changes in valuation allowances and the expected full utilization of The Company recognizes tax benefits from uncertain tax positions only if it is more likely than not the tax position will be sustained upon audit by the taxing authorities. During the third quarter of 2023, the Company recorded unrecognized U.S. federal and state tax benefits of $110 million and $31 million, respectively, resulting from research and development expenditures related to drilling and completions costs incurred in prior years. If all, or a portion of, the unrecognized tax benefit is sustained upon examination by the taxing authorities, the tax benefit will be recognized as a reduction to the Company’s deferred tax liability and will affect the Company’s effective tax rate in the period recognized. Effective Tax Rate Ovintiv’s interim income tax expense is determined using the estimated annual effective income tax rate applied to year‑to‑date net earnings before income tax plus the effect of legislative changes and amounts in respect of prior periods. The estimated 52 annual effective income tax rate is impacted by expected annual earnings, changes in valuation allowances, income tax related to foreign operations, state taxes, the effect of legislative changes, non-taxable items and tax differences on transactions, which can produce interim effective tax rate fluctuations. For the third quarter and the first The determination of income and other tax liabilities of the Company and its subsidiaries requires interpretation of complex domestic and foreign tax laws and regulations, that are subject to change. The Company’s interpretation of tax laws may differ from the interpretation of the tax authorities. As a result, there are tax matters under review for which the timing of resolution is uncertain. The Company believes that the provision for income taxes is adequate. Additional information on income taxes can be found in Note 6 to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. Liquidity and Capital Resources Sources of Liquidity The Company has the flexibility to access cash equivalents and a range of funding alternatives at competitive rates through committed revolving credit facilities as well as debt and equity capital markets. Ovintiv closely monitors the accessibility of cost-effective credit and seeks to ensure that sufficient liquidity is in place to fund capital expenditures and dividend payments. In addition, the Company may use cash and cash equivalents, cash from operating activities, or proceeds from asset divestitures to fund its operations and capital allocation framework or to manage its capital structure as discussed below. The Company’s capital structure consists of total shareholders’ equity plus long-term debt, including any current portion. The Company’s objectives when managing its capital structure are to maintain financial flexibility to preserve Ovintiv’s access to capital markets and its ability to meet financial obligations and finance internally generated growth, as well as potential acquisitions. Ovintiv has a practice of maintaining capital discipline and strategically managing its capital structure by adjusting capital spending, adjusting dividends paid to shareholders, issuing new shares of common stock, purchasing shares of common stock for cancellation or return to treasury, issuing new debt and repaying or repurchasing existing debt. As at March 31, As at September 30, ($ millions, except as indicated) 2023 2022 2023 2022 Cash and Cash Equivalents $ 26 $ 271 $ 3 $ 18 Available Credit Facilities (1) 3,200 4,000 3,150 3,500 Available Uncommitted Demand Lines (2) 280 312 273 296 Issuance of U.S. Commercial Paper (280 ) - (359 ) (440 ) Total Liquidity $ 3,226 $ 4,583 $ 3,067 $ 3,374 Long-Term Debt, including current portion $ 3,756 $ 4,775 $ 6,163 $ 3,618 Total Shareholders’ Equity (3) $ 7,894 $ 4,684 $ 9,552 $ 6,550 Debt to Capitalization (%) (4) 32 50 39 36 Debt to Adjusted Capitalization (%) (5) 19 28 26 20 53 The Company has full access to two committed revolving U.S. dollar denominated credit facilities totaling $3.5 billion, which include a $2.2 billion revolving credit facility for Ovintiv Inc. and a $1.3 billion revolving credit facility for a Canadian subsidiary (collectively, the “Credit Facilities”). The Credit Facilities, which mature in July 2026, provide financial flexibility and allow the Company to fund its operations or capital investment program. At Depending on the Company’s credit rating and market demand, the Company may issue from its two U.S. CP programs, which include a $1.5 billion program for Ovintiv Inc. and a $1.0 billion program for a Canadian subsidiary. As at The Ovintiv has a U.S. shelf registration statement under which the Company may issue from time to time, debt securities, common stock, preferred stock, warrants, units, share purchase contracts and share purchase units in the U.S. The U.S. shelf registration statement was renewed in March 2023. The obligations under the Company’s existing debt securities are fully and unconditionally guaranteed on a senior unsecured basis by Ovintiv Canada ULC, an indirect wholly-owned subsidiary of the Company. Additional information on the Company’s Canadian Operations segment and the Bow office lease can be found in the Results of Operations section in this MD&A and the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q and the MD&A and audited Consolidated Financial Statements and accompanying notes for the year ended December 31, 2022, which are included in Items 7 and 8, respectively, of the 2022 Annual Report on Form 10-K. Ovintiv is currently in compliance with, and expects that it will continue to be in compliance with, all financial covenants under the Credit Facilities. Management monitors Debt to Adjusted Capitalization, which is a non-GAAP measure defined in the Non-GAAP Measures section of this MD&A, as a proxy for Ovintiv’s financial covenant under the Credit Facilities, which requires Debt to Adjusted Capitalization to be less than 60 percent. As at The Company’s debt-based metrics have increased over the prior year primarily due to the increase in long-term debt resulting from the Permian Acquisition. 54 Sources and Uses of Cash In the first Three months ended March 31, Three months ended September 30, Nine months ended September 30, ($ millions) Activity Type 2023 2022 Activity Type 2023 2022 2023 2022 Sources of Cash, Cash Equivalents and Restricted Cash Cash from operating activities Operating $ 1,068 $ 685 Operating $ 906 $ 962 $ 2,805 $ 2,991 Proceeds from divestitures Investing 12 1 Investing 12 225 741 230 Net issuance of revolving long-term debt Financing 187 - Net issuance of revolving debt Financing 29 225 316 440 Issuance of long-term debt Financing - - 2,278 - Other Investing - 48 Investing 27 34 116 82 1,267 734 974 1,446 6,256 3,743 Uses of Cash and Cash Equivalents Capital expenditures Investing 610 451 Investing 834 511 2,084 1,473 Acquisitions Investing 199 15 Investing 59 12 273 34 Corporate acquisition, net of cash acquired Investing - - 3,225 - Repayment of long-term debt (1) Financing - 6 Financing - 525 - 1,634 Purchase of shares of common stock Financing 239 71 Financing 45 325 373 531 Dividends on shares of common stock Financing 61 52 Financing 82 62 225 178 Other Investing/Financing 137 64 Financing 3 2 75 68 1,246 659 1,023 1,437 6,255 3,918 Foreign Exchange Gain (Loss) on Cash, Cash Equivalents Foreign Exchange Gain (Loss) on Cash, Cash Equivalents - 1 Foreign Exchange Gain (Loss) on Cash, Cash Equivalents - 1 (3 ) (2 ) Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash $ 21 $ 76 Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash $ (49 ) $ 10 $ (2 ) $ (177 ) Operating Activities Net cash from operating activities in the third quarter and first Additional detail on changes in non-cash working capital can be found in Note Non-GAAP Cash Flow in the third quarter and first Three months ended Net cash from operating activities partially offset by: 55 Nine months ended September 30, 2023 versus September 30, 2022 Net cash from operating activities decreased $186 million compared to the first nine months of 2022 primarily due to: partially offset by: Investing Activities Cash used in investing activities in the first Capital expenditures increased Acquisitions in the first Corporate acquisition in the first nine months of 2023 was $3,225 million, which relates to the Permian Acquisition in the second quarter of 2023. Additional information regarding the Permian Acquisition can be found in Note 8 to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. Divestitures in the first Financing Activities Net cash from and/or used in financing activities has been impacted by the Company’s bond offering in the second quarter of 2023 and Ovintiv’s strategic objective to return value to shareholders by repaying or repurchasing existing debt, purchasing shares of common stock and paying dividends. Net cash From time to time, Ovintiv may seek to retire or purchase the Company’s outstanding debt through cash purchases and/or exchanges for other debt or equity securities, in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, the Company’s liquidity requirements, contractual restrictions and other factors. The Company’s long-term debt, including the current portion of 56 On May 31, 2023, Ovintiv completed a public offering of senior unsecured notes of $600 million with a coupon rate of 5.65 percent due May 15, 2025, $700 million with a coupon rate of 5.65 percent due May 15, 2028, $600 million with a coupon rate of 6.25 percent due July 15, 2033 and $400 million with a coupon rate of 7.10 percent due July 15, 2053. The net proceeds of the offering, totaling $2,278 million, were used to fund a portion of the Company’s Permian Acquisition. In support of the Company’s commitment to unlocking shareholder value, Ovintiv utilizes its capital allocation framework to increase returns to shareholders and to focus on strategic opportunities to strengthen the balance sheet. Ovintiv expects to continue to deliver additional shareholder returns through share For additional information on long-term debt refer to Note Further details on the Company’s debt-based metrics can be found in the Non-GAAP measures section of this MD&A. Dividends The Company pays quarterly dividends to common shareholders at the discretion of the Board of Directors. Three months ended March 31, Three months ended September 30, Nine months ended September 30, ($ millions, except as indicated) 2023 2022 2023 2022 2023 2022 Dividend Payments $ 61 $ 52 $ 82 $ 62 $ 225 $ 178 Dividend Payments ($/share) $ 0.25 $ 0.20 $ 0.30 $ 0.25 $ 0.85 $ 0.70 On Dividends increased Normal Course Issuer Bid and Other Share Buybacks On September In the third quarter and first On September 13, 2023, the Company purchased one million shares of Ovintiv common stock from the 15 million shares offered for sale in a secondary public offering by NMB Stock Trust, a Delaware statutory trust. The total consideration paid was approximately $45 million, or $45.45 per share, and the shares were cancelled during the third quarter of 2023. The share purchase accelerates Ovintiv’s expected fourth quarter share purchases under its existing shareholder return framework. 57 Material Cash Requirements For information on material cash requirements, refer to the Material Cash Requirements section of the MD&A included in Item 7 of the 2022 Annual Report on Form 10-K. Commitments and Contingencies For information on commitments and contingencies, refer to Note Critical Accounting Estimates There have been no significant changes to the Non-GAAP Measures Certain measures in this document do not have any standardized meaning as prescribed by U.S. GAAP and, therefore, are considered non-GAAP measures. These measures may not be comparable to similar measures presented by other issuers and should not be viewed as a substitute for measures reported under U.S. GAAP. These measures are commonly used in the oil and gas industry and by Ovintiv to provide shareholders and potential investors with additional information regarding the Company’s liquidity and its ability to generate funds to finance its operations. Non-GAAP measures include: Non-GAAP Cash Flow, Debt to Adjusted Capitalization, Debt to EBITDA and Debt to Adjusted EBITDA. Management’s use of these measures is discussed further below. Cash from Operating Activities and Non-GAAP Cash Flow Non-GAAP Cash Flow is a non-GAAP measure defined as cash from (used in) operating activities excluding net change in other assets and liabilities, and net change in non-cash working capital. Management believes this measure is useful to the Company and its investors as a measure of operating and financial performance across periods and against other companies in the industry, and is an indication of the Company’s ability to generate cash to finance capital investment programs, to service debt and to meet other financial obligations. This measure is used, along with other measures, in the calculation of certain performance targets for the Company’s management and employees. Three months ended March 31, Three months ended September 30, Nine months ended September 30, ($ millions, except as indicated) 2023 2022 2023 2022 2023 2022 Cash From (Used in) Operating Activities $ 1,068 $ 685 $ 906 $ 962 $ 2,805 $ 2,991 (Add back) deduct: Net change in other assets and liabilities (5 ) (12 ) (14 ) (17 ) (31 ) (42 ) Net change in non-cash working capital 222 (346 ) (192 ) 31 174 (182 ) Non-GAAP Cash Flow $ 851 $ 1,043 $ 1,112 $ 948 $ 2,662 $ 3,215 Debt to Capitalization and Debt to Adjusted Capitalization Debt to Adjusted Capitalization is a non-GAAP measure which adjusts capitalization for historical ceiling test impairments that were recorded as at December 31, 2011. Management monitors Debt to Adjusted Capitalization as a proxy for the Company’s financial covenant under the Credit Facilities which require Debt to Adjusted Capitalization to be less than 60 percent. Adjusted Capitalization includes debt, total shareholders’ equity and an equity adjustment for cumulative historical ceiling test impairments recorded as at December 31, 2011 in conjunction with the Company’s January 1, 2012 adoption of U.S. GAAP. ($ millions, except as indicated) March 31, 2023 December 31, 2022 September 30, 2023 December 31, 2022 Debt (Long-Term Debt, including Current Portion) $ 3,756 $ 3,570 $ 6,163 $ 3,570 Total Shareholders’ Equity 7,894 7,689 9,552 7,689 Capitalization $ 11,650 $ 11,259 $ 15,715 $ 11,259 Debt to Capitalization 32% 32% 39% 32% Debt (Long-Term Debt, including Current Portion) $ 3,756 $ 3,570 $ 6,163 $ 3,570 Total Shareholders’ Equity 7,894 7,689 9,552 7,689 Equity Adjustment for Impairments at December 31, 2011 7,746 7,746 7,746 7,746 Adjusted Capitalization $ 19,396 $ 19,005 $ 23,461 $ 19,005 Debt to Adjusted Capitalization 19% 19% 26% 19% The increases in Debt to Capitalization and Debt to Adjusted Capitalization are primarily due to the increase in long-term debt resulting from the Permian Acquisition. Debt to EBITDA and Debt to Adjusted EBITDA Debt to EBITDA and Debt to Adjusted EBITDA are non-GAAP measures. EBITDA is defined as trailing 12-month net earnings (loss) before income taxes, depreciation, depletion and amortization, and interest. Adjusted EBITDA is EBITDA adjusted for impairments, accretion of asset retirement obligation, unrealized gains/losses on risk management, foreign exchange gains/losses, gains/losses on divestitures and other gains/losses. Management believes these measures are useful to the Company and its investors as a measure of financial leverage and the Company’s ability to service its debt and other financial obligations. These measures are used, along with other measures, in the calculation of certain financial performance targets for the Company’s management and employees. ($ millions, except as indicated) March 31, 2023 December 31, 2022 September 30, 2023 December 31, 2022 Debt (Long-Term Debt, including Current Portion) $ 3,756 $ 3,570 $ 6,163 $ 3,570 Net Earnings (Loss) 4,365 3,637 2,564 3,637 Add back (deduct): Depreciation, depletion and amortization 1,213 1,113 1,549 1,113 Interest 308 311 312 311 Income tax expense (recovery) 54 (77 ) (11 ) (77 ) EBITDA $ 5,940 $ 4,984 $ 4,414 $ 4,984 Debt to EBITDA (times) 0.6 0.7 1.4 0.7 Net Earnings (Loss) 4,365 3,637 2,564 3,637 Add back (deduct): Depreciation, depletion and amortization 1,213 1,113 1,549 1,113 Accretion of asset retirement obligation 18 18 18 18 Interest 308 311 312 311 Unrealized (gains) losses on risk management (1,771 ) (741 ) (398 ) (741 ) Foreign exchange (gain) loss, net 13 15 (6 ) 15 Other (gains) losses, net (9 ) (33 ) (19 ) (33 ) Income tax expense (recovery) 54 (77 ) (11 ) (77 ) Adjusted EBITDA $ 4,191 $ 4,243 $ 4,009 $ 4,243 Debt to Adjusted EBITDA (times) 0.9 0.8 1.5 0.8 The increases in Debt to EBITDA and Debt to Adjusted EBITDA are primarily due to the increase in long-term debt resulting from the Permian Acquisition. EBITDA and Adjusted EBITDA only include the results of operations from the acquired Permian assets for the post-acquisition period from June 12, 2023 to September 30, 2023. Item 3: Quantitative and Qualitative Disclosures About Market Risk The primary objective of the following information is to provide forward-looking quantitative and qualitative information about Ovintiv’s potential exposure to market risks. The term “market risk” refers to the Company’s risk of loss arising from adverse changes in oil, NGL and natural gas prices, foreign currency exchange rates and interest rates. The following disclosures are not meant to be precise indicators of expected future losses but rather indicators of reasonably possible losses. The forward-looking information provides indicators of how the Company views and manages ongoing market risk exposures. COMMODITY PRICE RISK Commodity price risk arises from the effect fluctuations in future commodity prices, including oil, NGLs and natural gas, may have on future revenues, expenses and cash flows. Realized pricing is primarily driven by the prevailing worldwide price for crude oil and spot market prices applicable to the Company’s natural gas production. Pricing for oil, NGLs and natural gas production is volatile and unpredictable as discussed in Part 1, Item 2 of this Quarterly Report on Form 10‑Q in the Executive Overview section in Management’s Discussion and Analysis of Financial Condition and Results of Operations and in Item 1A. “Risk Factors” of the 2022 Annual Report on Form 10‑K. To partially mitigate exposure to commodity price risk, the Company may enter into various derivative financial instruments including futures, forwards, swaps, options and costless collars. The use of these derivative instruments is governed under formal policies and is subject to limits established by the Board of Directors and may vary from time to time. Both exchange traded and over-the-counter traded derivative instruments may be subject to margin-deposit requirements, and the Company may be required from time to time to deposit cash or provide letters of credit with exchange brokers or counterparties to satisfy these margin requirements. For additional information relating to the Company’s derivative and financial instruments, see Note The table below summarizes the sensitivity of the fair value of the Company’s risk management positions to fluctuations in commodity prices, with all other variables held constant. The Company has used a 10 percent variability to assess the potential impact of commodity price changes. Fluctuations in commodity prices could have resulted in unrealized gains (losses) impacting pre-tax net earnings as follows: March 31, 2023 September 30, 2023 (US$ millions) 10% Price 10% Price 10% Price 10% Price Crude oil price $ (24 ) $ 30 $ (202 ) $ 170 NGL price (2 ) 2 (2 ) 2 Natural gas price (17 ) 16 (56 ) 54 FOREIGN EXCHANGE RISK Foreign exchange risk arises from changes in foreign exchange rates that may affect the fair value or future cash flows from the Company’s financial assets or liabilities. As Ovintiv operates primarily in the United States and Canada, fluctuations in the exchange rate between the U.S. and Canadian dollars can have a significant effect on the Company’s reported results. The table below summarizes selected foreign exchange impacts on Ovintiv’s financial results when compared to the same Three Months Ended Nine Months Ended $ millions $/BOE $ millions $/BOE $ millions $/BOE Increase (Decrease) in: Capital Investment $ (5 ) $ (3 ) $ (13 ) Transportation and Processing Expense (1) (15 ) $ (0.32 ) (7 ) $ (0.13 ) (34 ) $ (0.22 ) Operating Expense (1) (2 ) (0.05 ) (1 ) (0.02 ) (5 ) (0.03 ) Administrative Expense (5 ) (0.10 ) (1 ) (0.02 ) (8 ) (0.05 ) Depreciation, Depletion and Amortization (1) (4 ) (0.08 ) (1 ) (0.03 ) (8 ) (0.05 ) Foreign exchange gains and losses also arise when monetary assets and monetary liabilities denominated in foreign currencies are translated and settled, and primarily include: To partially mitigate the effect of foreign exchange fluctuations on future commodity revenues and expenses, the Company may enter into foreign currency derivative contracts. As at As at The table below summarizes the sensitivity to foreign exchange rate fluctuations, with all other variables held constant. The Company has used a 10 percent variability to assess the potential impact from Canadian to U.S. foreign currency exchange rate changes. Fluctuations in foreign currency exchange rates could have resulted in unrealized gains (losses) impacting pre-tax net earnings as follows: March 31, 2023 September 30, 2023 (US$ millions) 10% Rate 10% Rate 10% Rate 10% Rate Foreign currency exchange $ 129 $ (157 ) $ 117 $ (143 ) INTEREST RATE RISK Interest rate risk arises from changes in market interest rates that may affect the fair value or future cash flows from the Company’s financial assets or liabilities. The Company may partially mitigate its exposure to interest rate changes by holding a mix of both fixed and floating rate debt and may also enter into interest rate derivatives to partially mitigate effects of fluctuations in market interest rates. As at Item 4: Controls and Procedures DISCLOSURE CONTROLS AND PROCEDURES Ovintiv’s Chief Executive Officer and Chief Financial Officer performed an evaluation of the effectiveness of the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in reports it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and to ensure that the information required to be disclosed by the Company in reports that it files or submits under the Exchange Act, is accumulated and communicated to the Company’s management, including the principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING PART II Item 1. Legal Proceedings Please refer to Item 3 of the 2022 Annual Report on Form 10‑K and Note There have been no material changes to the legal proceedings since the update presented in our quarterly report on Form 10-Q for the quarterly period ended June 30, 2023. Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in Item 1A., "Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2022 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Issuer Purchase of Equity Securities On September 28, 2022, the Company announced it had received regulatory approval to purchase, for cancellation or return to treasury, up to approximately 24.8 million shares of common stock pursuant to a NCIB over a 12-month period from October 3, 2022 to October 2, 2023. The number of shares of common stock authorized for purchase On September 26, 2023, the TSX accepted the Company’s notice of intention to renew its NCIB to purchase up to approximately 26.7 million shares of common stock, during the 12-month period commencing October 3, 2023 and ending October 2, 2024. The number of shares authorized for purchase represents 10 percent of Ovintiv’s public float (as defined in the TSX Company Manual) as of September 21, 2023, which equals approximately 10 percent of Ovintiv’s issued and outstanding shares of common stock as at such time. During the three months ended Period Total Number of Average Total Number of Shares Maximum Number of Shares January 1 to January 31, 2023 1,312,436 $ 49.43 1,312,436 20,049,220 February 1 to February 28, 2023 1,551,789 45.80 1,551,789 18,497,431 March 1 to March 31, 2023 2,339,252 43.63 2,339,252 16,158,179 Total 5,203,477 $ 45.74 5,203,477 16,158,179 Period Total Number of Average Total Number of Shares Maximum Number of Shares July 1 to July 31, 2023 - $ - - 13,646,915 August 1 to August 31, 2023 - - - 13,646,915 September 1 to September 30, 2023 1,000,000 45.45 1,000,000 12,646,915 Total 1,000,000 $ 45.45 1,000,000 12,646,915 In the first quarter of 2022, Ovintiv obtained an exemption order (the “NCIB Exemption”) from the Alberta Securities Commission and the Ontario Securities Commission, which permits Ovintiv to make repurchases (the “Proposed Bids”), under its current and any future normal course issuer bids, through the facilities of the NYSE and other U.S.-based trading systems (collectively, “U.S. Markets”), in excess of the maximum allowable purchases under applicable Canadian securities laws. The NCIB Exemption applies to any Proposed Bid commenced within 36 months of the date of the exemption order and is subject to several other conditions, including that Ovintiv remain a U.S. and SEC foreign issuer under applicable Canadian securities laws. The purchases of common stock under a Proposed Bid must also be made in compliance with other applicable Canadian securities laws and applicable U.S. rules. Additionally, the NCIB Exemption 64 of shares of common stock purchased by Ovintiv, and any person or company acting jointly or in concert with Ovintiv, in reliance on the NCIB Exemption and the Other Published Markets Exemption within any period of 12 months exceeds Item 3. Defaults Upon Senior Securities None. Item 4. Mine Safety Disclosures Not applicable. Item 5. Other Information None. Item 6. Exhibits Exhibit No Description 31.1 31.2 32.1* Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350. 32.2* Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350. 101.INS Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. 101.SCH Inline XBRL Taxonomy Schema Document. 101.CAL Inline XBRL Calculation Linkbase Document. 101.DEF Inline XBRL Definition Linkbase Document. 101.LAB Inline XBRL Label Linkbase Document. 101.PRE Inline XBRL Presentation Linkbase Document. 104 The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Ovintiv Inc. By: /s/ Corey D. Code Name: Corey D. Code Title: Executive Vice-President & Chief Financial Officer Dated: Operations.the Russian invasion of Ukraine.geopolitical events. Recessionary concerns continue to have an impact on global demand as central banks maintain tight monetary policies. Supply and the accumulation of global oil inventories will be impacted by changes in OPEC+ production levels, the extent of decline in oil exports from Russia and changes in production by non-OPEC countries.In April 2023, OPEC+ announced additional production cuts to begin in May and remain in place until the end of 2023. In the same month, Russia extended its previously announced March production cuts to the end of 2023. The unforeseen production cuts resulted in immediate upward pressures on oil prices.the Russian invasion of Ukraine.33throughoutthrough the remainder of 2023 following the closing of the Permian Acquisition and as the commodity price environment evolves. Ovintiv pursues innovative ways to maximize cash flows and minimize the impact of inflation to reduce upstream operating and administrative expenses.In contemplationWith the closing of the Permian Acquisition in the second quarter of 2023 and the expected additionalincrease in production volumes, in 2023, the Company has undertakenexecuted additional oil hedge positions since the agreement was announced.positions. As at AprilSeptember 30, 2023, the Company has hedged approximately 92.6110.0 Mbbls/d of expected oil and condensate production and 546600 MMcf/d of expected natural gas production for the remainder of the year. In addition, Ovintiv proactively utilizes transportation contracts to diversify the Company’s sales markets, thereby reducing significant exposure to any given market and regional pricing.1819 to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.has commencedcontinues to execute its 2023 capital investment program, focusing on maximizing returns from high margin liquids and generating significant cash flows in excess of capital expenditures.During the first quarter of 2023, the Company invested $610 million, which was in line with first quarter guidance range of $600 million to $650 million. In AprilNovember 2023, the Company updated its full year 2023 capital investment guidance range to $2,600$2,745 million to $2,900$2,785 million from $2,150which reflects the successful integration of the newly acquired Permian assets, sale of the Bakken assets, execution efficiencies and cost savings. During the third quarter of 2023, the Company invested $834 million, which was below the third quarter guidance range of $840 million to $2,350$890 million reflecting the recently announced Permian Acquisition. The Company expectsdue to meet its full year 2023 capital investment guidance.efficiencies. redesigned wet sand sourcing model incorporates on-site sand storage and delivery systems, which is designed to reduce trucking delays. This model increases operational efficiencies and contributes to well cost savings as well as providing increased resiliency against winter weather. Ovintiv's large-scale cube development model utilizes multi-well pads and advanced completion designs to maximize returns and resource recovery from its reservoirs. Ovintiv’s disciplined capital program and continuous innovation create flexibility to allocate capital in changing commodity markets to minimize the impact of inflation and maximize cash flows while preserving the long-term value of the Company’s multi-basin portfolio.firstthird quarter of 2023, total average production volumes were 511.4571.8 MBOE/d, which exceeded firstthe third quarter guidance range of approximately 500.0540.0 MBOE/d to 560.0 MBOE/d. Average oil and plant condensate production volumes were 166.0214.2 Mbbls/d and average other NGL production volumes were 86.286.7 Mbbls/d, which exceeded third quarter guidance ranges of 202.0 Mbbls/d to 208.0 Mbbls/d and 80.0 Mbbls/d to 85.0 Mbbls/d, respectively. Average natural gas production volumes were 1,5551,625 MMcf/d, which exceeded firstis at the top end of the third quarter guidance range of approximately 160.0 Mbbls/d, 84.0 Mbbls/d and 1,5251,575 MMcf/d respectively.to 1,625 MMcf/d.FullIn November 2023, the Company updated its full year 2023 production volume guidance ranges for oil and condensate, and total production volumes were updated in April to reflect the recently announced Permian Acquisitionstrong well performance and the salesuccessful integration of the Bakkennewly acquired Permian assets. The Company expects to meet its full year 2023 total production guidance range of 520.0550.0 MBOE/d to 545.0560.0 MBOE/d, including oil and plant condensate production volumes of approximately 185.0196.0 Mbbls/d to 195.0198.0 Mbbls/d, other NGLs production volumes of approximately 80.087.0 Mbbls/d to 85.089.0 Mbbls/d and natural gas production volumes of approximately 1,5251,615 MMcf/d to 1,5751,630 MMcf/d.With increased activity inDuring the first half of 2023, the oil and gas industry experienced continued supply chain constraints and stronginflationary pressures resulting from the elevated commodity price environment. However, with recent declines in commodity prices and oil and gas activity, the industry has begun to see decreases in inflationary pressures. While some supply chain constraints and inflationary pressures are expectedmay persist for the remainder of 2023, the Company expects inflation to continue to elevate service and supply costs. Upward pressure on service and supply costs will continue to be impacted by supply chain disruptions, labor shortages and increased demand for fuel, electricity and steel.stabilize. Ovintiv continues to minimize any inflationary pressures with efficiency improvements and effective supply chain management to reduce upstream operating expenses. The Company quickly deploys best practices across its portfolio, ultimately maximizing the performance and overall efficiency of its operations.34full year upstream transportation and processing costs of approximately $9.00$8.00 per BOE to $9.50$8.50 per BOE, upstream operating expenses of approximately $4.00 per BOE to $4.50 per BOE, and total production, mineral and other taxes of approximately four to five percent of upstream revenues. The Company’s upstream operations refers tosummationsecond quarter of 2023, the Company closed the Permian Acquisition and funded the cash portion of the USAtransaction with net proceeds of $2,278 million from the issuance of senior unsecured notes, cash proceeds received from the sale of the Company’s Bakken assets, cash on hand and Canadian operating segments.proceeds from short-term borrowings.discrete secondlong-term debt and liquidity position can be found in Note 11 to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q and the Liquidity and Capital Resources section of this MD&A, respectively.expects to publishpublished its full year 2022 ESG results in its 2023 sustainability report, which highlights the Company'sCompany’s progress in emissions intensity reductions including an emissions reduction roadmap aimed to meet the Company'sCompany’s Scope 1&2 GHG emissions target by 2030. As at the end of 2022, the Company has achieved a greater than 30 percent reduction in the Scope 1&2 GHG emissions intensity and is on track to meet its emissions intensity reduction target of 50 percent by 2030. The GHG emissions reduction target is tied to the 2023 annual compensation program for all employees.full alignment with the World Bank Zero Routine Flaring initiative, well ahead of the World Bank’s target date of 2030.AprilJune 2023, the Company announcedclosed the Permian Acquisition, which the Company believes will doubleincreasing both oil production volumes and net premium inventory in the Permian. In contemplation of the Permian Acquisition, theThe Company is working to understand the impact of the new assetadditional Permian assets on theits emissions profile and the World Bank Zero Routine Flaring initiative. Ovintiv is anticipatingundergoing an integration period to align the performance of its newthe acquired inventory tointo the Company'sCompany’s existing assets. Ovintiv remains committed to its ESG targets.("DEI"(“DEI”). The Company’s social commitment framework, which is rooted in the Company’s foundational values of integrity, safety, sustainability, trust and respect, fosters a culture of inclusion that respects stakeholders and strengthens communities.Company'sCompany’s annual compensation program. Additional information on DEI and employee safety can be found in the Human Capital section of Items 1 and 2 of the 2022 Annual Report on Form 10-K.354036413742quarternine months of 20222023 exclude certain other revenue and royalty adjustments with no associated production volumes of $1 million and $1 million, respectively (2022 - $2 million.million and $7 million, respectively).March 31,September 30, 2023 versus March 31,September 30, 2022$227$470 million compared to the first nine months of 2022 primarily due to:$19.09$13.10 per bbl, or 20 percent, in the average realized oil prices which decreased revenues by $219 million. The decrease reflected lower Houston and WTI benchmark prices which were both down 19 percent.NGL RevenuesThree months ended March 31, 2023 versus March 31, 2022NGL revenues were lower by $207 million compared to the first quarter of 2022 primarily due to:•A decrease of $13.83 per bbl, or 4042 percent, in the average realized other NGL prices which decreased revenues by $105$108 million. The decrease reflected lower other NGL benchmark prices and lower regional pricing; and$20.92$22.04 per bbl, or 2224 percent, in the average realized plant condensate prices which decreased revenues by $70$243 million. The decrease reflected lower WTI and Edmonton Condensate benchmark prices which were down 1921 percent and 1117 percent, respectively, and lower regional pricing relative to the WTI benchmark price in Canadian Operations;price;5.92.5 Mbbls/d decreased revenues by $52$72 million. Lower volumes were primarily due to natural declines and higher effective royalty rates in Montney (5.9(4.3 Mbbls/dd), partially offset by successful drilling in Montney and 1.5Permian (1.5 Mbbls/d, respectively)d); and7.05.5 Mbbls/d increased revenues by $20$54 million. Higher volumes were primarily due to higher recoveries of other NGLs in Anadarko (5.2 Mbbls/d) and successful drilling in BakkenPermian and Montney (4.2 Mbbls/d), the Permian (2.9Acquisition in the second quarter of 2023 (2.0 Mbbls/d), and lower effective royalty rates resulting from lower commodity prices in Montney (1.4 Mbbls/d), partially offset by third-party plant outagesthe sale of the Bakken assets in Montney (1.9the second quarter of 2023 (1.8 Mbbls/d).March 31,September 30, 2023 versus March 31,September 30, 2022$13$564 million compared to the firstthird quarter of 2022 primarily due to:$0.30$4.27 per Mcf, or six65 percent, in the average realized natural gas prices which decreased revenues by $42$635 million. The decrease reflected lower NYMEX, Dawn and AECO benchmark prices which were down 69 percent, 69 percent and 59 percent, respectively; and3461 percent, 3160 percent and five46 percent, respectively; and68170 MMcf/d increased revenues by $29 million$272 million. Higher volumes were primarily due to lower effective royalty rates resulting from lower commodity prices in Montney (103 MMcf/d) and successful drilling in Montney Bakken and Permian (118(92 MMcf/d), partially offset by higher effective royalty ratesthird-party plant outages and pipeline restrictions in Montney (28 MMcf/d), as well as third-party fracing impacts and plant outages in Montney (25(21 MMcf/d).3844March 31,September 30, 2023 can be found in Note 1819 to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.IncludesPrimarily includes realized gains and losses related to the USA and Canadian Operations. Market Optimization and other derivative contracts with no associated production volumes.1718 to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.March 31,September 30, 2023 versus March 31,September 30, 2022$366$125 million compared to the firstthird quarter of 2022 primarily due to:200232 million), lower sales of third-party purchased liquids volumes primarily relating to price optimization activities in the USA Operations ($110 million) and lower sales of third-party purchased natural gas volumes primarily relating to marketing arrangements for assets divested in prior years ($564 million);39Nine months ended September 30, 2023 versus September 30, 2022910 to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.March 31,September 30, 2023 versus March 31,September 30, 2022$10$20 million compared to the firstthird quarter of 2022 primarily due to:1923 million) and the sale of the Bakken assets in the second quarter of 2023 ($15 million);oil volumes in Permian primarily due to the Permian Acquisition ($21 million).517 million);March 31,September 30, 2023 versus March 31,September 30, 2022increased $49decreased $35 million compared to the firstthird quarter of 2022 primarily due to:Rate escalationLower variable contract rates in Permian ($55 million), the sale of transportation contractsthe Bakken assets in Uintathe second quarter of 2023 ($19 million) and a higher U.S./Canadian dollar exchange rate ($7 million);1772 million), higher costs relating to the diversification of the Company'sCompany’s downstream markets ($1751 million), higher flow-through rates resulting from increased third-party plant operating costs in Montney ($1426 million), higher downstream transport costsrate escalation of transportation contracts in Uinta ($19 million) and third-party plant turnarounds in Montney ($13 million) and higher gas volumes in Bakken and Permian ($98 million);HigherLower variable contract rates in Permian ($100 million), a higher U.S./Canadian dollar exchange rate ($1534 million) and lower variable contract ratesthe sale of the Bakken assets in Permianthe second quarter of 2023 ($1225 million).4047(1)Upstream Operating Expense per BOE for the first quarter of 2023 includes long-term incentive costs of $0.07/BOE (2022 - $0.18/BOE).March 31,September 30, 2023 versus March 31,September 30, 2022$18$15 million compared to the firstthird quarter of 2022 primarily due to:Sustained inflationary pressuresThe Permian Acquisition in the second quarter of 2023 ($62 million);relatingdue to discretionary workoversmore wells on production and sustained inflationary pressures ($4260 million);1336 million), updates to operating contract terms, including a recovery of prior years’ costs ($29 million), the sale of the Bakken assets in the second quarter of 2023 ($27 million) and lower long-term incentive costs resulting from a decrease in the Company'sCompany’s share price compared to an increase in 2022 ($711 million).1516 to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.March 31,September 30, 2023 versus March 31,September 30, 2022$365$127 million compared to the firstthird quarter of 2022 primarily due to:201234 million), lower third-party purchased liquids volumes primarily relating to price optimization activities in the USA Operations ($110 million) and lower third-party purchased natural gas volumes primarily relating to marketing arrangements for assets divested in prior years ($543 million);41Nine months ended September 30, 2023 versus September 30, 2022March 31,September 30, 2023 versus March 31,September 30, 2022$100$195 million compared to the firstthird quarter of 2022 primarily due to:83157 million and $12$7 million, respectively) and higher production volumes in the USA and Canadian Operations ($11 million)27 million and $5 million, respectively).48 million).and Canadian Operations increased $3.12$3.94 per BOE and $0.40 per BOE, respectively compared to the first quarternine months of 2022 primarily due to a higher depletable base.base associated with the Permian Acquisition.CostsThese expenses primarily include salaries and benefits, operating lease, office, information technology, restructuringtransaction and long-term incentive costs.quarternine months of 2023 include costs related to The BOWBow office lease of $28$29 million and $86 million, respectively (2022 - $29 million)$30 million and $88 million, respectively), half of which is recovered from sublease revenues.March 31,September 30, 2023 versus March 31,September 30, 2022$86$23 million compared to the firstthird quarter of 2022 primarily due to:RecoveryLower long-term incentive costs resulting from a lower share price impact compared to 2022 ($25 million).quarternine months of 2023 compared to an increase in 2022 ($98114 million);1516 to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.4250March 31,September 30, 2023 versus March 31,September 30, 2022decreased $3increased $15 million compared to the firstthird quarter of 2022 primarily due to:savingsexpense related to senior unsecured notes issued in May 2023 ($36 million) and interest expense related to outstanding balances under the redemption of certain senior notes in 2022Company’s U.S. CP program and revolving credit facilities ($1811 million);Company'sCompany’s U.S. commercial paper ("U.S. CP")CP program and revolving credit facilities ($830 million);an assessmentpremiums of $22 million related to certain prior years' tax items ($8 million).the Company’s open market repurchases of senior notes in 2022.March 31,September 30, 2023 versus March 31,September 30, 2022increased $2of $22 million compared to a loss of $19 million in the firstthird quarter of 2022 primarily due to:GainsUnrealized foreign exchange gains on the translation of intercompany notes ($25 million), lower unrealized foreign exchange losses of U.S. dollar risk management contracts issued from Canada ($14 million) and lower foreign exchange losses on the settlements of U.S. dollar financing debt issued from Canada ($12 million);losses ina loss of $21 million during the first nine months of 2022 ($5 million) and higher unrealizedprimarily due to:gainsgain on the translation of U.S. dollar risk management contracts and foreign exchange gain on the settlements of U.S. dollar financing debt issued from Canada compared to losses in 2022 ($3 million)33 million and $13 million, respectively);RealizedLosses on other monetary revaluations compared to gains in 2022 ($15 million) and foreign exchange losses on the settlement of U.S. dollar risk management contracts issued from Canada and intercompany notes compared to gains in 2022 ($5 million)8 million and $7 million, respectively).43quarternine months of 2023 includes interest income of $2 million.$8 million primarily generated from short-term investments. Other gains in the first quarternine months of 2022 includes interest income of $22$24 million primarily associated with the resolution of prior years’ tax items.March 31,September 30, 2023 versus March 31,September 30, 2022firstthird quarter of 2023, Ovintiv recorded an income tax expenserecovery of $126$13 million compared to an income tax recoveryexpense of $5$88 million in 2022 primarily due to the recognition of U.S. federal and state research and development credits in 2023 of $107 million and $15 million, respectively, associated with eligible drilling and completion costs incurred in prior years.Ovintiv's CanadianOvintiv’s operating losses in Canada, resulting in Canadian current tax in 2023.2023, partially offset by the recognition of U.S. federal and state research and development credits in 2023 of $107 million and $15 million, respectively, associated with eligible drilling and completion costs incurred in prior years.TheFor the third quarter and the first nine months of 2023, the Company’s effective tax rates were (3.3) percent and 14.8 percent, respectively, which were lower than the U.S federal statutory tax rate was 2.0of 21 percent forprimarily due to the recognition of research and development credits noted above.quarternine months of 2022, the Company’s effective tax rates were 6.9 percent and 6.0 percent, respectively, which waswere lower than the U.S federal statutory tax rate of 21 percent primarily due to a lower annual effective income tax rate resulting from a reduction in valuation allowances.44(3)$1.9$1.85 billion in the U.S. and $1.3 billion in Canada (2022 - $2.5$2.2 billion and $1.5$1.3 billion, respectively).$42$49 million in related undrawn letters of credit (2022 - $340$319 million and $28$23 million, respectively).Shareholders’ Equity reflectsIncludes the impact of long-term debt and shares of common stock purchased, for cancellation, underissued in conjunction with the Company’s NCIB program.Permian Acquisition.March 31,September 30, 2023, $300$350 million was outstanding under the revolving Credit Facilities.March 31,September 30, 2023, the Company had $280$359 million of commercial paper outstanding under its U.S. CP program maturing at various dates with a weighted average interest rate of approximately 5.666.25 percent, which is supported by the Company’s Credit Facilities. All of Ovintiv’s credit ratings are investment grade as at March 31, 2023 and were reaffirmed following the announcement of the Permian Acquisition.September 30, 2023.Credit Facilities,available credit facilities, uncommitted demand lines, and cash and cash equivalents, net of outstanding commercial paper, provide Ovintiv with total liquidity of approximately $3.2$3.1 billion as at March 31,September 30, 2023. At March 31,September 30, 2023, Ovintiv also had approximately $42$49 million in undrawn letters of credit issued in the normal course of business primarily as collateral security related to sales arrangements.45In AprilOn June 12, 2023, the Company announcedclosed the Permian Acquisition in a cash and stock transaction valued atissued approximately $4.275 billion before closing adjustments. Ovintiv is expected to issue approximately 32.631.8 million shares of Ovintiv common stock and thepaid approximately $3.2 billion in cash, for total consideration of approximately $4.4 billion, which included customary closing adjustments. The cash portion of this transaction is expected to bethe acquisition was funded through a combination of cash on hand,net proceeds from the issuance of senior unsecured notes, cash proceeds received from the pending sale of the Company'sCompany’s Bakken assets, as well ascash on hand and proceeds from new debt financing and/or borrowings under the Company's credit facility. If required, the Company has also received fully committed bridge financing to facilitate the transaction.short-term borrowings.March 31,September 30, 2023, the Company’s Debt to Adjusted Capitalization was 1926 percent. The definitions used in the covenant under the Credit Facilities adjust capitalization for cumulative historical ceiling test impairments recorded in conjunction with the Company’s January 1, 2012 adoption of U.S. GAAP. Additional information on financial covenants can be found in Note 14 to the Consolidated Financial Statements included in Item 8 of the 2022 Annual Report on Form 10‑K.quarternine months of 2023, Ovintiv primarily generated cash through operating activities.activities and received net proceeds from the Company’s debt issuance to fund a portion of the Permian Acquisition. The following table summarizes the sources and uses of the Company’s cash and cash equivalents.
and Restricted Cash Held in Foreign Currency
and Restricted Cash Held in Foreign Currency
and Restricted Cash Held in Foreign Currencyquarternine months of 2023 was $1,068$906 million and $2,805 million, respectively, and was primarily a reflection of the impacts from average realized commodity prices, realized gains/losses on risk management, production volumes and changes in non‑cash working capital, lower realized losses on risk management in revenues, partially offset by lower average realized commodity prices.capital.1920 to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. Ovintiv expects it will continue to meet the payment terms of its suppliers.quarternine months of 2023 was $851$1,112 million and $2,662 million, respectively, and was primarily impacted by the items affecting cash from operating activities which are discussed below and in the Results of Operations section of this MD&A.46March 31,September 30, 2023 versus March 31,September 30, 2022increased $383decreased $56 million compared to the firstthird quarter of 2022 primarily due to:ChangesLower realized commodity prices ($977 million), changes in non-cash working capital ($568223 million), increase in current income taxes ($65 million), higher interest expense ($31 million) and higher operating expense, excluding non-cash long-term incentive costs ($18 million);3702,014 million), lower administrative expenses, excludinghigher production volumes ($672 million), changes in non-cash long-term incentive costsworking capital ($24356 million), and lower production, mineral and other taxes ($10 million);partially offset by:•Lower realized commodity prices ($436 million), higher transportation and processing expense ($49 million), higher operating expense, excluding non-cash long-term incentive costs ($24 million), lower interest income ($20 million) and lower production volumes ($1172 million).quarternine months of 2023 was $863$4,725 million primarily due to acquisitions and capital expenditures. Capital expenditures, and acquisition and divestiture activities are summarized in Notes 2 and 7, respectively, to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.$159$611 million compared to the first quarternine months of 2022, primarily due to a higher capital expenditure plan, additional capital spending associated with the Permian assets acquired in the second quarter of 2023 and sustained inflationary cost pressures and timing of projects.pressures.quarternine months of 2023 were $199$273 million, (2022 - $15 million), which primarily included property purchases with oil and liquids rich potential.potential in the USA Operations (2022 - $34 million).quarternine months of 2023 were $12$741 million, which primarily included the sale of the Bakken assets in North Dakota and certain properties that did not complement Ovintiv'sOvintiv’s existing portfolio of assets. Divestitures in the first nine months of 2022 were $230 million, which primarily included the sale of portions of the Uinta assets located in northeastern Utah and Bakken assets located in northeastern Montana, as well as certain properties that did not complement Ovintiv’s existing portfolio of assets.used infrom financing activities in the first quarternine months of 2023 decreased by $9was $1,921 million compared to net cash used in financing activities of $1,971 million in 2022. The decreasechange was primarily due to the net issuance of long-term debt in 2023 of $2,278 million as discussed below compared to a repayment in 2022 of $1,634 million and decreased purchases of shares of common stock in 2023 compared to 2022 ($158 million), partially offset by a decrease in net issuance of revolving long-term debt ($187 million), partially offset by increased purchases of shares of common stock under the Company’s NCIB program in 2023 compared to 2022 ($168124 million) and an increase in dividend payments in 2023 ($947 million).$580$709 million, totaled $3,756$6,163 million at March 31,September 30, 2023. The Company’s long-term debt at December 31, 2022, including the current portion of $393 million, totaled $3,570 million. As at March 31,September 30, 2023, the Company has no fixed rate long-term debt due until 20262025 and beyond.buybacks under its NCIB program.buybacks.1011 to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.47April 2,November 7, 2023, the Board of Directors declared a dividend of $0.30 per share of common stock payable on June 30,December 29, 2023, to common shareholders of record as of JuneDecember 15, 2023. This represents an increase of 20 percent to the quarterly dividend payments.$9$47 million compared to the first quarternine months of 2022 as a result of Ovintiv increasing its annualized dividend to $1.00 per share of common stock in the second quarter of 2022.2022 and a further increase to an annualized dividend of $1.20 per share of common stock in the second quarter of 2023. The dividend increase reflects the Company’s commitment to returning capital to shareholders.28, 2022,26, 2023, the Company announced it had received regulatory approval for the renewal of its NCIB program, thatwhich enables the Company to purchase, for cancellation or return to treasury, up to approximately 24.826.7 million shares of common stock over a 12-month period from October 3, 20222023 to October 2, 2023.2024. The number of shares authorized for purchase represents approximately 10 percent of Ovintiv’s issued and outstanding shares of common stockpublic float as at September 19, 2022.21, 2023. The Company expects to continue to execute the renewed NCIB program in conjunction with its capital allocation framework.quarternine months of 2023, under the currentprevious NCIB program, which extended from October 3, 2022 to October 2, 2023, the Company purchased, for cancellation of approximately, 5.2nil and 7.7 million, respectively, shares of common stock for total consideration of approximately $239 million.nil and $328 million, respectively.2021 to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.Company'sCompany’s critical accounting policies and use of estimates from the disclosures reported in the “Critical Accounting Estimates” section of the MD&A included in Item 7 of the 2022 Annual Report on Form 10-K. The Company evaluated the impact of the Permian Acquisition, and the use of estimates and key judgments used in the preliminary purchase price allocation are disclosed in Note 8 to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.4858495950601819 to the Condensed Consolidated Financial Statements under Part I, Item 1 of this Quarterly Report on Form 10‑Q.
Increase
Decrease
Increase
Decreaseperiodperiods in 2022.
September 30,
September 30,5161March 31,September 30, 2023, Ovintiv has entered into $401$133 million notional U.S. dollar denominated currency swaps at an average exchange rate of C$1.33561.3470 to US$1, which mature monthly through the remainder of 2023.2023, and $200 million notional U.S. dollar denominated currency swaps at an average exchange rate of C$1.3501 to US$1, which mature monthly throughout the first half of 2024.March 31,September 30, 2023, Ovintiv did not have any U.S. dollar denominated financing debt issued from Canada that was subject to foreign exchange exposure.
Increase
Decrease
Increase
DecreaseMarch 31,September 30, 2023, Ovintiv had floating rate revolving credit and term loan borrowings of $580$709 million. Accordingly, on a before-tax basis, the sensitivity for each one percent change in interest rates on floating rate revolving credit and term loan borrowings was $6$7 million.5262March 31,September 30, 2023.ThereFor the third quarter ended September 30, 2023, management’s assessment of, and conclusion on, the effectiveness of internal controls over financial reporting did not include the internal controls related to the Permian Acquisition that closed on June 12, 2023. Upon closing, the Permian Acquisition’s total assets acquired represented 33 percent of the Company’s consolidated total assets as of March 31, 2023. The assets acquired generated revenues of $519 million for the period from June 12, 2023, to September 30, 2023, which represented seven percent of the Company’s consolidated total revenues for the nine months ended September 30, 2023. Under guidelines established by the SEC, companies are permitted to exclude acquisitions from their assessment of internal controls over financial reporting for a period of up to one year following an acquisition while integration occurs. The Company is in the process of assessing the internal controls over financial reporting of the Permian Acquisition. Except as noted above, there were no changes in Ovintiv’sthe Company’s internal controlcontrols over financial reporting during the firstthird quarter of 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controlcontrols over financial reporting.53632021 to the Condensed Consolidated Financial Statements under Part I, Item 1 of this Quarterly Report on Form 10‑Q.other than those listed in this section.Completion of the Permian Acquisition is subject to conditions, including certain conditions that may not be satisfied or completed on a timely basis or at all. Failure to complete the Permian Acquisition could have material and adverse effects on us.Completion of the Permian Acquisition is subject to a number of conditions, including, among other things, the termination or expiration of the applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. Such conditions, some of which are beyond our control, may not be satisfied or waived in a timely manner or at all and therefore make the completion and timing of the completion of the Permian Acquisition uncertain. In addition, the purchase agreement contains certain termination rights for both us and the Sellers’ representative, which if exercised, will also result in the Permian Acquisition not being consummated. Furthermore, the governmental authorities from which the regulatory approvals are required may impose conditions on the completion of the Permian Acquisition or require changes to the terms thereof. Such conditions or changes and the process of obtaining regulatory approvals could have the effect of delaying or impeding consummation of the transactions or of imposing additional costs or limitations on us following completion of the Permian Acquisition, any of which might have an adverse effect on us following completion of the Permian Acquisition.If the Permian Acquisition is not completed, our ongoing business may be adversely affected and, without realizing any of the benefits of having completed the Permian Acquisition, we will be subject to a number of risks, including the following:•we will be required to pay our costs relating to the Permian Acquisition, such as legal, accounting and financial advisory expenses, whether or not the transactions are completed;•time and resources committed by our management to matters relating to the Permian Acquisition could otherwise have been devoted to pursuing other beneficial opportunities;•the market price of Ovintiv’s common stock could decline to the extent that the current market price reflects a market assumption that the Permian Acquisition will be completed;•we may experience negative reactions from employees, customers or vendors; and•since the purchase agreement restricts the conduct of our business prior to completion of the Permian Acquisition, we may not have been able to take certain actions during the pendency of the transaction that would have benefitted us as an independent company and the opportunity to take such actions may no longer be available.In addition to the above risks, if the purchase agreement is terminated and our Board seeks another acquisition, Ovintiv’s shareholders cannot be certain that we will be able to find a party willing to enter into a transaction as attractive to us asQuarterly Report on Form 10-Q for the Permian Acquisition. Also, if the purchase agreement is terminated under certain specified circumstances by the Sellers or the Sellers’ representative (on behalf of the Sellers), the $213.8 million deposit placed by us into escrow at signing, to be credited toward the cash consideration payable at the closing of the Permian Acquisition, will be disbursed to the Sellers.If the Permian Acquisition is consummated, we may be unable to successfully integrate the assets into our business or achieve the anticipated benefits of the Permian Acquisition.Our ability to achieve the anticipated benefits of the Permian Acquisition will depend in part upon whether we can integrate the assets and their operations into our existing business in an efficient and effective manner. We may not be able to accomplish this integration process successfully. The successful acquisition of producing properties, including the assets, requires an assessment of several factors, including:•recoverable reserves;54•future natural gas and oil prices and their appropriate differentials;•availability and cost of transportation of production to markets;•availability and cost of drilling equipment and of skilled personnel;•development and operating costs including sand, access to water and potential environmental and other liabilities; and•regulatory, permitting and similar matters.The accuracy of these assessments is inherently uncertain. In connection with our assessment of the assets, we have performed a review of the subject properties that we believe to be generally consistent with industry practices. The review was based on our analysis of historical production data, assumptions regarding capital expenditures and anticipated production declines without review by an independent petroleum engineering firm. Data used in such review was furnished by the Sellers and/or the affiliates of Sellers, or obtained from publicly available sources. Our review may not reveal all existing or potential problems or permit us to fully assess the deficiencies and potential recoverable reserves for all of the assets, and the reserves and production related to the assets may differ materially after such data is reviewed by an independent petroleum engineering firm or further by us. Inspections were not performed on every well, and environmental problems are not necessarily observable even when an inspection is undertaken.The integration process may be subject to delays or changed circumstances, and we can give no assurance that the assets will perform in accordance with our expectations or that our expectations with respect to integration or cost savings as a result of the Permian Acquisition will materialize.We and the affiliates of Sellers that we intend to acquire in the Permian Acquisition will be subject to business uncertainties while the Permian Acquisition is pending, which could adversely affect our business.In connection with the pendency of the Permian Acquisition, it is possible that certain persons with whom we or the Sellers and/or the affiliates of Sellers have a business relationship may delay or defer certain business decisions or might decide to seek to terminate, change or renegotiate their relationships with us or the Sellers and/or the affiliates of Sellers, as the case may be, as a result of the Permian Acquisition, which could negatively affect our or the Sellers’ and/or the affiliates of Sellers' revenues, earnings and cash flows as well as the market price of Ovintiv’s common stock, regardless of whether the Permian Acquisition is completed. Also, our and the Sellers’ and/or the affiliates of Sellers’ ability to attract, retain and motivate employees may be impaired until the Permian Acquisition is completed, and our ability to do so may be impaired for a period of time thereafter, as current and prospective employees may experience uncertainty about their roles within the company following the Permian Acquisition.Under the terms of the purchase agreement, we and the Sellers, as well as the affiliates of Sellers, are subject to certain restrictions on the conduct of business prior to the closing of the Permian Acquisition, which may adversely affect our and the Sellers’ ability to execute certain of our and their business strategies, including the ability in certain cases to modify or enter into certain contracts, acquire or dispose of certain assets, incur or prepay certain indebtedness, incur encumbrances, make capital expenditures or settle claims. Such limitations could negatively affect our and the Sellers’ businesses and operations prior to the completion of the Permian Acquisition.We and our subsidiaries will have substantial indebtedness after giving effect to the Permian Acquisition, which may limit our financial flexibility and adversely affect our financial results.As ofthree months ended March 31, 2023, we had total long-term debt of approximately $3.8 billion, consisting primarily of our senior unsecured notes and the amounts outstanding under our revolving credit facilities. The cash portion of the consideration for the Permian Acquisition is expected to be funded through a combination of cash on hand, cash proceeds received from the Bakken sale divestiture, as well as borrowings under the Company's credit facility and/or proceeds from new debt financing. Our pro forma indebtedness will represent an increase in comparison to our indebtedness on a recent historical basis. We believe that post-transaction we will retain our investment grade credit ratings. However, any increase in our indebtedness could have adverse effects on our financial condition and results of operations, including:•increasing difficulty to satisfy our obligations with respect to our debt obligations, including any repurchase obligations that may arise thereunder;55•diverting a significant portion of our cash flows to service our indebtedness, which could reduce the funds available to us for operations and other purposes;•increasing our vulnerability to general adverse economic and industry conditions;•placing us at a competitive disadvantage compared to our competitors that are less leveraged and, therefore, may be able to take advantage of opportunities that we would be unable to pursue due to our indebtedness;•limiting our ability to access the capital markets to raise capital on favorable terms;•impairing our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, general corporate or other purposes; and•increasing our vulnerability to interest rate increases, as our borrowings under our revolving credit facility are at variable interest rates.We believe that will have flexibility to repay, refinance, repurchase, redeem, exchange or otherwise terminate large portions of our outstanding debt obligations following the Permian Acquisition. However, there can be no guarantee that we would be able to execute such refinancings on favorable terms or at all, and a high level of indebtedness increases the risk that we may default on our debt obligations. Our ability to meet our debt obligations and to reduce our level of indebtedness depends on our future performance. Our future performance depends on many factors independent of the Permian Acquisition, some of which are beyond our control, such as general economic conditions and oil and natural gas prices. We may not be able to generate sufficient cash flows to pay the interest on our debt, and future working capital, borrowings or equity financing may not be available to pay or refinance such debt.We have incurred and will incur significant transaction costs in connection with the Permian Acquisition.We have incurred, and are expected to continue to incur, a number of non-recurring costs associated with the Permian Acquisition, combining the operations of the assets with ours and achieving desired synergies. These costs have been, and will continue to be, substantial and, in many cases, will be borne by us whether or not the Permian Acquisition is completed. A substantial majority of non-recurring expenses will consist of transaction costs and include, among others, fees paid to financial, legal, accounting and other advisors and employee severance and benefit costs. We will also incur costs related to formulating and implementing integration plans. Although we expect that the elimination of duplicative costs, as well as the realization of synergies and efficiencies related to the integration of the assets, should allow us to offset these transaction costs over time, this net benefit may not be achieved in the near term or at all.The Permian Acquisition may not be accretive, and may be dilutive, to our earnings per share, which may negatively affect the market price of our common stock.Because shares of our common stock will be issued upon the consummation of the Permian Acquisition, it is possible that, although we currently expect the Permian Acquisition to be accretive to earnings per share, the Permian Acquisition may be dilutive to our earnings per share, which could negatively affect the market price of Ovintiv’s common stock. In connection with the completion of the Permian Acquisition, based on the number of issued and outstanding shares of our common stock as of April 3, 2023, we will issue approximately 32.6 million shares of our common stock to the Sellers. The issuance of these new shares of our common stock could have the effect of depressing the market price of our common stock, through dilution of earnings per share or otherwise. Any dilution of, or delay of any accretion to, our earnings per share could cause the price of shares of our common stock to decline or increase at a reduced rate. Furthermore, the Sellers or our current stockholders may not wish to continue to invest in our expanded operations of the combined company, or for other reasons may wish to dispose of some or all of their interests in Ovintiv, and as a result may seek to sell their shares of our common stock following, or in anticipation of, completion of the Permian Acquisition. The purchase agreement and/or related transaction agreements delivered in connection therewith restrict the ability of the Sellers to sell such shares of our common stock for 90 days following completion of the Permian Acquisition. Therefore, these sales (or the perception that these sales may occur), coupled with the increase in the outstanding number of shares of our common stock, may affect the market for, and the market price of, our common stock in an adverse manner. If the Permian Acquisition is completed and our stockholders, including the Sellers, sell substantial amounts of our common stock in the public market following the consummation of the Permian Acquisition, the market price of our common stock may decrease. These sales might also make it more difficult for us to raise capital by selling equity or equity-related securities at a time and price that we otherwise would deem appropriate.56Our results may suffer if we do not effectively manage our expanded operations following the Permian Acquisition.The success of the Permian Acquisition will depend, in part, on our ability to realize the anticipated benefits and cost savings from combining our and Sellers’ businesses, including the need to integrate the operations and businesses of the Sellers into our existing business in an efficient and timely manner, to combine systems and management controls and to integrate relationships with customers, vendors, industry contacts and business partners.The anticipated benefits and cost savings of the Permian Acquisition not be realized fully or at all, may take longer to realize than expected or could have other adverse effects that we do not currently foresee. Some of the assumptions that we have made, such as the achievement of operating synergies, may not be realized. There could also be unknown liabilities and unforeseen expenses associated with the Permian Acquisition were not discovered in the due diligence review conducted by each company prior to entering into the purchase agreement.Securities class action and derivative lawsuits may be brought against us in connection with the Permian Acquisition, which could result in substantial costs and may delay or prevent the Permian Acquisition from being completed.Securities class action lawsuits and derivative lawsuits are often brought against public companies that have entered into acquisition, merger or other business combination agreements. Even if such a lawsuit is without merit, defending against these claims can result in substantial costs and divert management time and resources. An adverse judgment could result in monetary damages, which could have a negative impact on our liquidity and financial condition.Lawsuits that may be brought against us or our or their directors could also seek, among other things, injunctive relief or other equitable relief, including a request to enjoin us from consummating the Permian Acquisition. One of the conditions to the closing of the Permian Acquisition is that no court, tribunal or other governmental authority of competent jurisdiction has issued a final and non-appealable order, decree, injunction or judgment restraining, enjoining or otherwise prohibiting the consummation of the Permian Acquisition. Consequently, if a plaintiff is successful in obtaining an injunction prohibiting completion of the Permian Acquisition, that injunction may delay or prevent the Permian Acquisition from being completed within the expected timeframe or at all, which may adversely affect our business, financial position and results of operation.2023.representsrepresented 10 percent of Ovintiv’s issued and outstanding shares of common stock as at September 19, 2022.March 31,September 30, 2023, the Company purchased approximately 5.2one million shares of common stock for total consideration of approximately $238$45 million at a weighted average price of $45.74.$45.45. The following table presents the common shares purchased during the three months ended March 31,September 30, 2023.
Shares Purchased (1)
Price Paid
per Share (2)
Purchased as Part of Publicly
Announced Plans or Programs
That May Yet be Purchased
Under the Plans or Programs
Shares Purchased (1)
Price Paid
per Share (2)
Purchased as Part of Publicly
Announced Plans or Programs
That May Yet be Purchased
Under the Plans or Programs2,864,225For the three months ended September 30, 2023, no shares of common stock were repurchased through our broker in accordance with a Rule 10b5-1 compliant plan initially adopted by the Company on September 30, 2021.57imposedimposes restrictions on the number of shares of common stock that may be acquired under the exemption, including that: (a) Ovintiv may not acquire common stock in reliance upon the exemption under subsection 4.8(3) of Canadian National Instrument 62-104 – Take-Over Bids and Issuer Bids (“NI 62-104”) from the requirements applicable to issuer bids (the “Other Published Markets Exemption”) if the aggregate number5%5 percent of the outstanding common stock on the first day of such 12-month period; and (b) the aggregate number of shares of common stock purchased pursuant to (i) a Proposed Bid in reliance on the NCIB Exemption; (ii) exempt issuer bid purchases made in the normal course through the facilities of the TSX; and (iii) the Other Published Markets Exemption does not exceed, over the 12-month period of its current NCIB, 10%10 percent of Ovintiv'sOvintiv’s public float. As a result, the NCIB Exemption effectively allows Ovintiv to purchase up to 10%10 percent of its public float on U.S. Markets under its NCIB. Without the NCIB Exemption this amount would be limited to 5%5 percent of Ovintiv’s outstanding common stock within a 12-month period under applicable Canadian securities law.2.1***March 31,September 30, 2023, has been formatted in Inline XBRL.* Certain annexes, schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. Ovintiv Inc. hereby undertakes to furnish supplemental copies of any of the omitted annexes, schedules and exhibits upon request by the SEC.** The certifications on Exhibits 32.1 and 32.2 hereto are deemed not “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section. Such certifications will not be deemed incorporated by reference to any filings under the Securities Act or the Exchange Act.5865May 9,November 7, 20235966